If you’re hiring help to care for an elderly parent—whether it’s a home health aide, companion, or housekeeper—you might be taking on more than just caregiving responsibilities. You could also be hiring a household employee, which comes with its own set of tax obligations.
Understanding the requirements for withholding and paying taxes on a household employee can feel overwhelming, but getting it right helps you avoid penalties, support your employee and ensure peace of mind.
So let’s walk through the essentials of household employment taxes—from determining worker status to filing the right forms.
What is a household employee?
A household employee is someone you hire to work in or around your home and who is subject to your control in terms of how and when they do their job. This can include:
- Home health aides
- Personal caregivers
- Housekeepers
- Cooks
- Gardeners
If you control the work, not just the end result, they’re likely a household employee—not an independent contractor.
Household employee vs. independent contractor
It’s a common misconception that you can treat anyone you hire as a contractor. But the U.S. Department of Labor (DOL) uses a six-factor test for determining who is an employee. You can classify household workers who don’t meet the definition of an employee as independent contractors.
Those six factors are:
- Opportunity for profit or loss depending on managerial skill. Can the worker earn profits or suffer losses through their own independent effort and decision-making? Some signs that they’re not an employee include being able to accept or decline work, hire their own workers, and purchase materials and supplies without prior approval.
- Investments by the worker and the employer. Does the worker make investments that are capital or entrepreneurial in nature? If the worker makes investments to increase the number of clients they serve, reduce costs, or increase sales, that can indicate they’re an independent contractor.
- Permanence of the work relationship. Independent contractors usually engage in work that is sporadic or project-based, while employees tend to have continuous work without a fixed ending date.
- Nature and degree of control. With an employee, the employer directs the work, provides tools, sets hours and supervises the tasks. An independent contractor, on the other hand, brings their own tools, sets their own schedule, and decides how to complete the work.
- Whether the work performed is integral to the employer’s business. This factor generally doesn’t pertain to household employees, but the DOL generally considers work that’s critical, necessary, or central to an employer’s business to come from an employee.
- Skill and initiative. Employees generally rely on their employer to provide training for a job, while independent contractors are usually responsible for seeking out specialized skills to perform the work.
Those are DOL rules, but the IRS uses control as the key factor.
For example, say you hire a family friend, Angela, to work as a senior caregiver for Mom while you’re at work during the day. You need Angela to be at your home from 9 am to 3 pm, Monday through Friday. You provide instructions for Mom’s routine, including when she gets medications, the activities or appointments Angela takes Mom to, and what Angela serves Mom for lunch.
In this case, Angela is a household employee because you have control over when, where and how she works.
Let’s consider a different scenario. Say you hire a house cleaning service to clean Mom’s house once a week. The owner of the company sends their employees to perform the work. They let you know when they can fit you into their schedule, bring their own tools, and clean the house with minimal input from you or Mom. The house cleaners are independent contractors because you have little control over when and how they work.
It’s important to get this distinction right because misclassifying someone can result in back taxes, penalties and interest.
What household employment taxes do you need to pay?
When you hire a household employee and pay them $2,800 or more in 2025, you’re required to handle certain federal and state taxes. IRS Publication 926, Household Employer’s Tax Guide, has more details on each of these household employment taxes, but here’s a quick overview:
Federal income tax withholding
You’re not required to withhold federal income tax unless your employee asks you to—and you agree. If you do, they’ll need to complete Form W-4, and you’ll withhold taxes from their paycheck.
At the end of the year, you’ll need to send them a Form W-2, Wage and Tax Statement, showing the income they earned during the year and the taxes you withheld on their behalf. You’ll also need to send a copy of the wage and tax statement to the IRS, the Social Security Administration, and potentially your state, city or local tax authority.
FICA taxes (Social Security and Medicare)
You and your employee each pay 7.65% of their wages. That figure includes 6.2% for Social Security tax and 1.45% for Medicare tax.
FICA taxes are mandatory if you pay your employee $2,800 or more in 2025. You’re responsible for withholding their share from each paycheck and remitting both portions to the IRS. However, you can choose to pay your employee’s share of Social Security and Medicare out of your own funds.
If you pay a household employee more than $200,000 during the calendar year, you’ll also need to withhold the 0.9% Additional Medicare tax on those excess wages. There’s no employer match on the Additional Medicare tax.
Federal Unemployment Tax Act (FUTA)
If you pay cash wages of $1,000 or more to any household employee during any quarter, you must pay federal unemployment tax on the first $7,000 of their wages. Cash wages include wages paid by check or money order.
Unlike FICA taxes, you don’t withhold FUTA taxes from an employee’s wages—you pay the full
The FUTA tax rate is 6% of the first $7,000 of wages. However, most household employers qualify for a credit of up to 5.4% as long as they pay state unemployment tax (SUTA) on time and don’t live in a credit reduction state. The potential credit reduction states for 2025 are California, Connecticut, New York and the U.S. Virgin Islands, according to the U.S. Department of Labor.
State unemployment tax
SUTA tax rules and rates vary from state to state. In Nebraska, state unemployment tax is known as state unemployment insurance (SUI). You’re required to pay SUI if you pay gross wages of $1,500 or more in any calendar quarter in a calendar year.
For new employers (other than construction employers), the SUI rate is 1.25% of the first $9,000 of employee wages. In subsequent years, you may qualify for experience ratings that can reduce your SUI rate as low as 0.0%.
To pay Nebraska SUI, you’ll need to register with NEworks and get an unemployment insurance tax number.
How to report household employment taxes
If you pay a household employee $2,800 or more in 2025 or withhold federal income tax, you’ll need to file Schedule H along with your personal tax return (Form 1040 or Form 1040-SR).
This form reports your total household employment taxes to the IRS.
How to complete Schedule H, Household Employment Taxes
Like many tax forms, Schedule H looks complicated, but it’s relatively simple once you get into it. Before starting, gather your payroll records, includingtotal wages paid, federal income tax withheld (if any), and FICA and FUTA taxes withheld and paid.
Here’s how to complete each section of Schedule H.
- General information. At the top of Schedule H, you’ll enter your name and Social Security number or employer identification number (if you have one). This section also has three yes or no questions to help you determine whether you need to file Schedule H.
- Part I: Social Security tax, Medicare tax, and federal income tax. Enter the employee’s wages and calculate Social Security and Medicare taxes split between you and your employee.
- Complete Part II: Federal Unemployment Tax. Enter the amount you paid in wages, calculate FUTA, and indicate whether you also paid SUTA.
- Complete Part III: Total household employment taxes. Add everything up: federal income tax withheld, FICA taxes, and FUTA.
- Attach Schedule H to Your 1040. Include the total household employment taxes on your Form 1040 or Form 1040-SR.
Keep in mind, if you use payroll services, they may generate Schedule H for you automatically.
How to manage payroll for a household employee
Handling payroll taxes for a household employee doesn’t mean doing it all yourself. Here are a few helpful options to simplify the process:
Nanny payroll by ADP
ADP offers payroll services tailored for household employers, including:
- Paying your household employee via check, direct deposit, or pay card
- Calculating taxes and filing payroll tax returns
- Year-end W-2s and Schedule H preparation
Care.com HomePay
Care.com’s HomePay is a household employee payroll service with a focus on families hiring caregivers. It handles:
- Quarterly and year-end payroll tax filings
- Employee pay stubs
- Labor law compliance
Get help with household employee taxes
Hiring help for an aging parent is a big emotional and financial decision. Taking care of your household employment taxes ensures you stay in compliance and treat your caregiver with the professionalism they deserve.
If all this feels like a lot, reach out to Firefly Financial Organizing. We help family caregivers just like you manage the details so you can focus on what matters most. Whether you need help getting started, understanding your obligations, or choosing a payroll provider, we’re here to help.
