Settle first the only question that matters: is the worker your employee or an independent contractor? If you control what work is done and how — you set the hours, supply the home and the tools, and direct the tasks — the worker is your employee, full stop, and you cannot paper over it by handing them a Form 1099. A genuinely independent provider who controls their own work, serves multiple clients, and runs their own business (an agency cleaning crew, a self-employed landscaper) is a contractor you simply pay. Most nannies and regular housekeepers are employees; most once-a-month services are not.
Once you have a household employee, three thresholds set your duties:
Pay any single household employee $3,000 or more in cash wages in 2026 and you owe Social Security and Medicare tax: 7.65% as the employer (6.2% plus 1.45%), plus the 7.65% employee share you are meant to withhold from their pay (you may instead pay it yourself, but that amount then becomes additional taxable wages to them). IRS Topic No. 756 — Employment Taxes for Household Employees
Pay more than $1,000 in any calendar quarter (this year or last) and you owe federal unemployment tax of 6% on the first $7,000 of each worker’s wages, cut to a net 0.6% once you take the credit for a state unemployment program. This threshold is fixed by statute and not indexed.
You are not required to withhold federal income tax from a household employee’s pay, but you may by mutual agreement (have the worker file a Form W-4). Most states layer their own withholding and unemployment rules on top.
The mechanics are unglamorous and unforgiving. Get an Employer Identification Number, verify the worker’s eligibility on Form I-9 at hire, issue a Form W-2 each January, file the W-3 transmittal, and report and pay everything on Schedule H with your 1040 — which means topping up your own withholding or estimated taxes during the year so the household-tax bill does not detonate an underpayment penalty in April. IRS Pub. 926, “Household Employer’s Tax Guide” is the full manual.
Two breaks soften the cost. A dependent-care FSA or the child and dependent care credit (section “Dependent Care Flexible Spending Account (DCFSA)”) can offset wages paid for childcare that lets a parent work, and wages paid to a caregiver for an elderly dependent may count toward deductible medical expenses when the care is medically necessary ( IRC §213). One exemption is worth knowing: wages you pay your own child under 21, your spouse, or your parent for household work are generally exempt from FICA — a grandparent watching the grandchildren is not a taxable household employee.
The mirror image — paying someone who staffs your business rather than your home — is not household employment at all. Those wages belong on the business return under ordinary payroll rules (section “Operational Deductions and Family Employment”). The line is the work performed, not who signs the check.