If you hire a nanny, housekeeper, caregiver, or another person to work in your home, you may have tax responsibilities as a household employer. Unlike hiring an independent contractor, employing someone directly can require you to calculate payroll taxes, provide wage statements, and report employment taxes to the Internal Revenue Service (IRS).
One important form is Schedule H (Form 1040), Household Employment Taxes. This form helps household employers report Social Security, Medicare, federal income tax withholding, and federal unemployment taxes when applicable.
Understanding how Schedule H works can help you meet your tax obligations and avoid common payroll mistakes.
What Is Schedule H?
Schedule H is an IRS tax form used to report certain employment taxes owed by individuals who employ household workers. It is generally filed with Form 1040 or another eligible federal income tax return.
Household employers use Schedule H to calculate and report applicable taxes on wages paid to household employees. Depending on the circumstances, these may include:
· Social Security taxes
· Medicare taxes
· Federal income tax withheld from an employee’s wages
· Federal Unemployment Tax Act (FUTA) taxes
You may need to file Schedule H even if you are not otherwise required to file a federal income tax return. In that situation, you can generally file Schedule H separately and pay the taxes due.
When must you file Schedule H?
For the 2025 tax year, you generally must file Schedule H if any of the following applies:
· You paid one household employee $2,800 or more in cash wages during 2025, subject to applicable exceptions.
· You withheld federal income tax from a household employee’s wages.
· You paid total cash wages of $1,000 or more to all household employees in any calendar quarter of 2024 or 2025.
These thresholds are specific to the 2025 tax year. For 2026 payroll, check the current IRS Household Employer’s Tax Guide for the applicable wage thresholds and rules.
Who Qualifies as a Household Employee?
A household employee is someone you hire to perform household work when you have the right to control not only what work is done but also how it is performed.
The key factor is the degree of control you have over the worker’s duties and working arrangements. The worker may still be a household employee even if you allow some independence in performing the job.
Common examples include:
· Nannies, babysitters, and au pairs
· Housekeepers and cleaning workers
· Cooks and personal chefs
· Caregivers, health aides, and private nurses
· Personal assistants
· Drivers
· Gardeners and yard workers
Household employee vs. independent contractor
Not everyone who performs work in or around your home is considered your employee.
For example, a nanny who follows your schedule and childcare instructions will generally be treated as a household employee. By contrast, a plumber who operates an independent business and decides how to complete a repair will generally be treated as an independent contractor.
The classification depends on the actual working relationship, not simply the job title or whether the worker receives a Form 1099.
Misclassifying an employee as an independent contractor can lead to unpaid employment taxes and other compliance issues.
What Are Household Employment Taxes?
Household employment taxes are sometimes called “nanny taxes.” They are the employment taxes that household employers may owe when they pay household employees.
Social Security and Medicare taxes
Employers and employees generally share Social Security and Medicare taxes. The employer is responsible for collecting the employee’s share, paying the employer’s share, and reporting the applicable wages and taxes.
For 2025, the general rates were:
Social Security: Employer 6.2%, Employee 6.2% | Medicare: Employer 1.45%, Employee 1.45% | Total: Employer 7.65%, Employee 7.65%.
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These rates apply to wages subject to the respective taxes. Social Security has an annual wage limit, while Medicare generally does not. Additional Medicare Tax may also apply to certain wages.
If you pay the employee’s share of Social Security and Medicare taxes out of your own funds instead of withholding it from wages, special wage and tax calculation rules may apply.
Federal income tax withholding
Household employers generally are not required to withhold federal income tax from household employees’ wages unless the employee requests withholding and the employer agrees.
If you agree to withhold federal income tax, obtain a completed Form W-4 and report the withholding as required.
Federal unemployment tax (FUTA)
FUTA helps fund unemployment compensation programs. Household employers generally must pay FUTA tax if they paid total cash wages of $1,000 or more to household employees in any calendar quarter of the current or preceding year, subject to the applicable rules.
FUTA is paid by the employer, not withheld from the employee’s wages. A credit may reduce the effective federal rate when the employer meets the requirements for qualifying state unemployment contributions.
State unemployment insurance, workers’ compensation, and other state employment requirements may also apply.
How to Complete and File Schedule H
Before completing Schedule H, gather the records needed to calculate wages and employment taxes accurately.
You may need:
· Your name, Social Security number, and employer identification number (EIN), as applicable
· Each household employee’s wage information
· Social Security and Medicare tax calculations
· Federal income tax withheld, if any
· Federal unemployment tax information
· Qualifying state unemployment contributions, when applicable
Steps for filing Schedule H
1. Determine whether you need to file. Review the household employee wage thresholds and withholding rules for the tax year.
2. Calculate applicable employment taxes. Include the relevant wages and apply the correct rates and limits.
3. Complete Schedule H. Follow the instructions for the tax year you are reporting.
4. Attach the form to your tax return. If you file Form 1040, Form 1040-SR, Form 1040-NR, or another eligible return, attach Schedule H as directed by the IRS.
5. File separately if necessary. If you are not required to file an individual income tax return, you may generally file Schedule H by itself.
6. Pay the taxes due. Follow the IRS payment instructions and deadlines applicable to your situation.
Household employers may also need to provide Form W-2 to qualifying employees and file Form W-3 with the Social Security Administration. Schedule H does not replace these wage-reporting obligations.
When Is Schedule H Due?
For most calendar-year individual taxpayers filing Schedule H for 2025, the filing deadline is April 15, 2026. If you attach Schedule H to an income tax return and receive a valid filing extension, the extended return deadline generally applies to the attached schedule.
An extension to file does not automatically extend the time to pay taxes owed. Interest and penalties may apply to unpaid amounts.
If you are filing for another tax year, use that year’s IRS instructions to confirm the applicable deadline.
What Records Should Household Employers Keep?
Good recordkeeping is essential for calculating employment taxes and responding to IRS questions.
Keep records of:
· Employee names, addresses, and Social Security numbers
· Wage payments, payment dates, and hours worked
· Social Security and Medicare taxes withheld or paid
· Federal income tax withholding, if applicable
· Forms W-4, W-2, and W-3
· Copies of Schedule H and related tax returns
· State employment tax payments and supporting documents
The IRS generally instructs household employers to retain Schedule H and related employment records for at least four years after the applicable filing due date or the date the taxes were paid, whichever is later.
Final Thoughts
Hiring household help can make daily life easier, but it may also create federal and state tax responsibilities. If you employ a nanny, caregiver, housekeeper, or another household worker, understanding employee classification, wage thresholds, payroll taxes, and filing deadlines is essential.
Schedule H helps household employers report applicable federal employment taxes, but it is only one part of household payroll compliance. Depending on your circumstances, you may also need to handle wage statements and state employment requirements.
Contnow Tax Preparation LLC can help you understand tax preparation requirements and identify household employment tax issues to review with a qualified tax professional. Consult the applicable IRS instructions before filing Schedule H or calculating household employment taxes.
Do you have any other questions? Send us an email at 📧 info@contnowtax.com and we’ll get back to you as soon as possible.
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