Schedule H: Household Employment Taxes
Used to report and pay Social Security, Medicare, and federal unemployment taxes for household employees such as nannies, housekeepers, and private nurses.
Overview
IRS Schedule H (Household Employment Taxes) is a supplemental schedule attached to Form 1040 that allows individuals to report and remit Social Security, Medicare, and federal unemployment (FUTA) taxes owed for household employees. If you paid a nanny, housekeeper, private nurse, caregiver, or similar domestic worker, you may be what the IRS calls a "household employer" — and that status comes with specific payroll tax obligations under IRC Sections 3101 through 3111 (FICA) and 3301 through 3311 (FUTA).
Schedule H consolidates what would otherwise require separate quarterly payroll filings for household employers into a single annual reconciliation attached to the personal return. Rather than filing Form 941 quarterly, most household employers satisfy their employment tax obligations entirely through Schedule H. The taxes computed on Schedule H flow to Schedule 2 (Additional Taxes) and ultimately into the total tax liability on Form 1040, meaning any underpayment can trigger estimated tax penalties if withholding or quarterly estimated payments weren't made throughout the year.
The "nanny tax" — a colloquial term for these obligations — has been a compliance flashpoint since it gained national attention in the early 1990s. Despite simplified reporting through Schedule H, the IRS estimates that household employer compliance remains lower than in other employment contexts. For 2026, the Social Security wage base and FUTA thresholds are subject to annual adjustment; practitioners should confirm current-year figures before filing. Household employers must also issue Form W-2 to each covered employee by January 31 of the following year and file Copy A with the Social Security Administration, obligations that exist independently of Schedule H itself.
Who Files This Form?
You must file Schedule H if you paid cash wages of $2,700 or more to any single household employee during the 2026 tax year. This threshold is indexed for inflation and applies per employee, not in aggregate — so if you paid three housekeepers $1,500 each, no Schedule H is required for Social Security and Medicare taxes, though FUTA may still apply.
For federal unemployment tax (FUTA) purposes, a lower and separate threshold applies: if you paid total cash wages of $1,000 or more to household employees in any calendar quarter of 2026 or the prior year, you must report and pay FUTA tax on Schedule H, regardless of whether the Social Security/Medicare threshold is met. This means it is possible to owe only FUTA — not FICA — and still be required to file Schedule H.
A "household employee" is someone you control both in terms of what work is done and how it is done. Workers who operate as independent contractors — supplying their own tools, setting their own hours, and working for multiple clients — are generally not household employees, but the IRS scrutinizes this classification carefully in domestic-worker contexts. Placement agencies, nanny-service companies, and similar third-party employers who retain control over workers typically relieve you of Schedule H obligations for those workers.
Important exceptions: you do not count wages paid to your spouse, your child under age 21, your parent (with limited exceptions involving grandchildren in your care), or any employee under age 18 whose principal occupation is not domestic service (e.g., a teenager doing occasional yard work). State unemployment tax obligations, which vary by state and are reported separately, do not affect the Schedule H filing requirement but may generate a FUTA credit that reduces the federal liability.
Key Fields
Line A: Cash wages paid to household employees
Enter total cash wages paid to all household employees during the year who individually met the $2,700 Social Security/Medicare threshold. Non-cash compensation such as lodging or meals is generally excluded from this line but may affect overall compensation analysis.
Line 1: Social Security wages
This is the amount of cash wages subject to Social Security tax, capped at the annual wage base for 2026. Wages above the Social Security wage base are still subject to Medicare tax but do not appear here.
Line 2 & 3: Social Security tax (employee + employer shares)
Each share is 6.2% of Social Security wages, for a combined 12.4% total. The employer's share is always your liability; the employee's share can be withheld from wages or paid by the employer on the employee's behalf, but either way it is reported here.
Line 4 & 5: Medicare wages and Medicare tax
Medicare tax is 2.9% total (1.45% each for employer and employee) with no wage cap. Note that the Additional Medicare Tax of 0.9% applies to employee wages above a threshold, but that is reported on Form 8959 — not on Schedule H.
Line 6: Federal income tax withheld
You are not required to withhold federal income tax from household employees, but if you and your employee agreed to voluntary withholding and you actually withheld amounts, enter them here. This credit reduces the net tax due on Schedule H.
Lines 8–10: FUTA tax calculation
FUTA is computed at 6% on the first $7,000 of each employee's cash wages. However, most employers receive a credit of up to 5.4% for state unemployment taxes paid on time, reducing the effective federal rate to 0.6%. If your state had a credit reduction due to outstanding federal loans, your effective rate will be higher.
Line 11: State unemployment tax credit
Enter state unemployment taxes paid to reduce your FUTA liability. The credit cannot exceed 5.4% of FUTA-taxable wages. If state unemployment taxes were not paid by the Schedule H due date, the credit is limited to 90% of the amount that would otherwise be allowable.
Line 14: Total household employment taxes
This is the sum of FICA taxes (Social Security + Medicare) and FUTA tax due. This amount flows to Schedule 2, Line 9, and becomes part of your total income tax liability on Form 1040. If this figure is significant, verify that you made adequate estimated tax payments throughout the year to avoid an underpayment penalty.
Filing Deadlines
April 15
October 15
Filed with Form 1040; subject to the same failure-to-file and failure-to-pay penalties.
Step-by-Step Instructions
- 1
Confirm employee status and wage totals: Before opening Schedule H, verify that each worker meets the household employee definition under IRS guidelines, then tally cash wages paid to each individual worker separately to determine which FICA and FUTA thresholds are triggered.
- 2
Gather payroll records and state unemployment documentation: Collect pay stubs, check registers, or bank records showing wages paid. Also gather your state unemployment tax payment receipts — you'll need these to claim the FUTA credit on Lines 8–11.
- 3
Complete the FICA section (Lines 1–7): Enter Social Security wages (capped at the current wage base), compute the combined 12.4% Social Security tax, enter Medicare wages and compute the 2.9% Medicare tax, and add any federal income tax voluntarily withheld from the employee.
- 4
Complete the FUTA section (Lines 8–13): Enter FUTA-taxable wages (first $7,000 per employee), apply the 6% rate, then subtract the state unemployment credit (up to 5.4%) to arrive at net FUTA tax. If you operate in a credit-reduction state, consult the Schedule H instructions for that year's reduction percentage.
- 5
Sum total household employment taxes on Line 14: Add the FICA amounts and net FUTA tax. Double-check arithmetic, especially if you have multiple employees at different wage levels.
- 6
Transfer the Line 14 total to Schedule 2 (Form 1040), Line 9: This ensures the household employment taxes are included in your total tax liability. Failure to make this transfer is one of the most common processing errors.
- 7
Issue Form W-2 to each covered household employee by January 31 and file Copy A with the Social Security Administration: Although this step is not part of completing Schedule H itself, it is a required parallel obligation and should be completed before or at the same time as preparing the return.
- 8
Assess estimated tax payments made: If you made estimated tax payments or had additional withholding specifically to cover household employment taxes, confirm those amounts are properly reflected on Form 1040 so you are not assessed an underpayment penalty.
- 9
Attach Schedule H to Form 1040 and file by April 15: If you obtain a filing extension, the extension applies to the Schedule H filing deadline, but any tax owed is still due by April 15 to avoid failure-to-pay penalties.
Common Mistakes to Avoid
Applying the $2,700 threshold in aggregate rather than per employee
The threshold is evaluated separately for each household employee. Track wages per worker — you may owe FICA for one employee but not another, and the FUTA threshold is analyzed independently as well.
Forgetting to transfer the Schedule H total to Schedule 2, Line 9
The IRS will recalculate tax and issue a notice if Line 14 of Schedule H is not carried to Schedule 2. Always trace the amount through to the main return and confirm software populates both forms correctly.
Claiming the full 5.4% FUTA credit without verifying state unemployment taxes were paid on time
The credit is limited if state unemployment taxes are paid after the Schedule H due date or if your state has a credit reduction. Pull the actual state payment confirmation before completing Lines 10–11.
Overlooking estimated tax payment requirements mid-year
Household employment taxes are due with the annual return, but if the combined liability causes underpayment of estimated taxes, a penalty applies. Most CPA firms advise increasing quarterly estimated payments in Q1 once the household employment relationship is established.
Misclassifying an employee as an independent contractor to avoid Schedule H
The IRS applies behavioral and financial control tests to domestic workers, and misclassification in this context is an audit trigger. If the household controls how and when work is performed, the worker is almost certainly an employee.
Failing to issue Form W-2 because "it's just a nanny tax situation"
Form W-2 is required for every household employee whose wages meet the FICA threshold, regardless of how informal the arrangement feels. Missing W-2s expose both employer and employee to penalties and can cause Social Security earnings discrepancies for the worker.
Frequently Asked Questions
For 2026, you must withhold and pay Social Security and Medicare taxes if you pay a household employee $2,700 or more in cash wages during the year. A separate, lower threshold of $1,000 in cash wages in any calendar quarter applies for federal unemployment (FUTA) tax. Both thresholds are evaluated per employee, not across all workers combined.
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