Do I have to pay taxes on what I pay to my Household Employee?

by TurboTax• Updated 2 weeks ago

People who work around your house under your direction are generally household employees. These include housekeepers, maids, babysitters, gardeners, and others. Contractors (like repairmen or plumbers) and other business people who work for you as independent contractors aren't your household employees. The main difference is that you control what household employees do and how they do it.

If you pay a household employee cash wages of $2,600 or more for 2023, then you need to withhold and report both Social Security and Medicare taxes from their pay. You generally must withhold 6.2% of Social Security and 1.45% of Medicare taxes (for a total of 7.65%) from all cash wages you pay to that employee. You also must pay your share of Social Security and Medicare taxes, which is also 7.65% of cash wages. (Cash wages include wages you pay by check, money order, etc.) Unless you prefer to pay your employee's share of Social Security and Medicare taxes from your own funds, you should withhold 7.65% from each payment of cash wages you make to the employee and pay this amount, along with your matching share, to the IRS.

There are some exceptions to these withholding requirements, including payments made to:

Your spouse
Your child who is under age 21
Your parent, unless an exception is met
An employee who is under age 18 at any time during the year, unless this work is their principal occupation; if they are a student, this work is not considered their principal occupation

You aren't required to withhold federal income taxes from your household employees' pay, but you can. If you and your employee agree to do this, IRS Publication 15 Circular E, Employer’s Tax Guide can guide you through this process.

Additional filing requirements might include Federal Unemployment Tax (FUTA), State Unemployment Tax (SUTA), and Forms W-2 and W-3 for any federal withholding that you did during the year. Also, you'll need to file Schedule H, Household Employment Taxes, with your individual tax return.

TurboTax Deluxe and above editions will help you with any household workers.