Household Employee

Household Employee: Definition, Examples, and Taxes

A household employee is someone hired and paid by a homeowner to perform services at or within the employer’s residence, where the employer directs both what work is done and how it is performed. Common examples include nannies, babysitters, housekeepers, private nurses, caretakers, drivers, and sometimes gardeners or yard workers when they’re employed directly by the household.

Who qualifies as a household employee

• The worker performs services in the employer’s home.
• The employer controls the tasks and the manner of performance.
• Work can be full-time or part-time and paid hourly, daily, weekly, or per job.
• Workers found through agencies or labor organizations can still be household employees.

If the worker controls what they do and how they do it, provides their own tools, and offers the same services to others, they are typically an independent contractor—not a household employee. Where the work is performed can also affect status (for example, a childcare worker in a private home is likely a household employee; the same worker at a daycare center would be employed by that center).

Examples

Household employees
* Nannies, babysitters, housekeepers, maids
* Private nurses, health aides, caretakers
* Drivers, domestic workers

Independent contractors (not household employees)
* Repairmen, carpenters, plumbers
* Yard service crews or gardeners who supply their own tools and work for multiple customers

Hiring and paperwork

• New household employees hired since 2020 must use the redesigned IRS Form W-4. Employees hired before 2020 generally do not need to submit a new W-4.
• Employers are not required by the IRS to withhold federal income tax from a household employee’s wages, but they may do so if the employee requests it.

Taxes and employer obligations

• As of 2024, if you pay a household employee more than $2,700 in cash wages during the tax year, you must withhold and remit the employee’s Social Security and Medicare taxes (FICA) to the IRS. State-level payroll taxes may also apply.
• FICA rates: employee portion = 7.65% (6.2% Social Security + 1.45% Medicare). Employers must also pay a matching 7.65%, bringing the total FICA burden to 15.3% on those wages.
• The payroll tax on household wages is commonly called the “nanny tax.”
• Many employers use payroll services to handle withholding, tax deposits, and reporting.

Legal and practical considerations

• Paying a household worker “under the table” without withholding and reporting taxes is illegal and can expose both employer and worker to IRS penalties.
• Distinguishing employee vs contractor status is crucial. Misclassification can lead to tax and employment-law consequences.

Bottom line

A household employee is a worker paid to perform services in a private home under the direction of the homeowner. Employers must understand classification rules, required forms, and tax obligations—especially Social Security and Medicare withholding when annual cash wages exceed the statutory threshold. Using payroll services or consulting a tax professional can simplify compliance.