Hiring a household employee, whether a nanny, house manager, or family assistant, is an exciting step for any family. But… it also comes with a LOT of other things, like… tax responsibilities, payroll obligations, and legal considerations. As a household employer, you need to ensure compliance with IRS regulations, payroll taxes, and insurance requirements. It can feel overwhelming, but don’t worry, I’ve got you covered!

At Sage Haus, we specialize in helping families hire and manage their household with confidence. Let’s break down what you need to know.

Disclaimer: The information provided in this blog post is for informational purposes only and should not be considered legal, tax, or financial advice. While we at Sage Haus strive to provide helpful guidance for household employers, we strongly recommend consulting with a professional tax advisor, attorney, or financial expert to ensure full compliance with federal and state employment laws.

---

What Is a Household Employer?

Let’s start at the very beginning… What exactly is a household employer? A household employer is someone who hires a worker to perform services in their home and has control over how and when the work is performed. This can includes:

• Nannies
• Housekeepers
• Family Assistants
• Private Chefs
• …and more

Independent Contractor vs. Household Employee

The IRS provides clear rules for distinguishing between an employee and an independent contractor (IRS Guidelines):

Independent Contractor:

They set their own hours, provide their own tools, and offer services to multiple clients.

Household Employee:

You dictate their schedule, provide tools, and expect them to work for you long-term.

Why does this matter?

Misclassifying a worker as an independent contractor instead of an employee can result in tax penalties.

Legal Work Authorization

As an employer, you must verify that your household employee is legally authorized to work in the U.S. using Form I-9 (Employment Eligibility Verification) (Download Form I-9).

---

Household Employer Tax 101: What You Need to Know

Now, let’s talk about… TAXES! Once you officially become a household employer, you have tax obligations that include Social Security, Medicare, and unemployment taxes.

Payroll Taxes You’re Required to Pay

If you pay a household employee $2,800 or more in a calendar year (2025 threshold), you must withhold and pay the following taxes (IRS Publication 926):

Social Security and Medicare Taxes (FICA)

Withhold 7.65% from your employee’s wages.

You must match this amount, paying another 7.65% as the employer.

Federal Unemployment Tax (FUTA)

If you pay $1,000 or more in wages in a calendar quarter, you must pay 6% on the first $7,000 of wages per employee.Many states also require state unemployment tax, which can reduce the FUTA rate.  For information on your State Unemployment Tax Information, you can learn more here.

Federal Income Tax

Unlike business employers, household employers aren’t required to withhold federal income tax, but you can if your employee requests it.To do this, your employee needs to complete Form W-4 (Download Here).

Required Tax Forms for Household Employers

Schedule H (Form 1040) – Reports household employment taxes on your personal tax return (IRS Schedule H).

Form W-2 – Must be provided to your employee by January 31st (Download Form W-2).

Form W-3 – Used to transmit W-2s to the Social Security Administration (Download Form W-3).

Pro Tip: Using a household payroll service simplifies tax compliance and helps avoid costly mistakes!

Payroll Made Easy: Best Household Payroll Services

Handling payroll manually can be time-consuming. Instead, consider using a household payroll provider that ensures compliance with household employer tax laws.

Here is our list of the Top household payroll services and what they include:

• HomePay by Care.com – Full-service payroll, tax filing, and HR support.
• Poppins Payroll – Specializes in nanny payroll.
• SurePayroll – Offers easy automated tax filings.
• Gusto – Provides payroll + benefits for household employers.
  

Why use a payroll provider? They withhold payroll taxes, issue Form W-2, and ensure compliance with state unemployment tax and employment tax obligations.

---

Insurance for Household Employers: What You Need to Know

Hiring a household employee means you need to think beyond payroll, insurance matters too! The right coverage protects both you and your employee, ensuring you’re covered in case of injuries, accidents, or liability claims.

Workers’ Compensation Insurance: Do You Need It?

Many states require household employers to carry workers’ compensation insurance to cover on-the-job injuries. If your employee gets hurt while working in your home, this insurance helps cover medical expenses, lost wages, and legal fees.

Here are some (not all) state-by-state requirements:

• California – Required for household employees working 20+ hours per week. (CA Dept. of Industrial Relations)
• New York – Required for household employees working 40+ hours per week. (NY Workers’ Comp Board)
• Florida – Required if employing 4+ domestic workers. (FL Dept. of Financial Services)

Pro Tip: Not every state has the same rules, so before you hire a nanny, housekeeper, or family assistant, make sure you check your own state’s requirements. You can find state-specific workers’ comp laws here! 

Liability Insurance: Do You Need Extra Protection?

Workers’ comp is only part of the picture. If an accident happens in your home and your household worker suffers an injury or causes damage, you could be held liable.

To protect yourself, consider adding a general umbrella liability policy or adjusting your homeowner’s insurance policy to cover household employees. Many standard home insurance policies don’t include coverage for paid workers, so check with your provider!

What to Ask Your Insurance Company:

• Does my homeowner’s policy cover household employees?
• Do I need an additional rider for workers’ compensation?
• Should I consider an umbrella liability policy for extra protection?

---

Background Checks & Hiring Compliance for Household Employers

Conducting background checks is a crucial step when hiring, such as nannies, house managers,  housekeepers, and family assistants. However, certain states have laws regulating when employers can ask about an applicant’s criminal history, often requiring a conditional job offer before a background check can be conducted.

States That Require a Conditional Job Offer Before Background Checks

• California – Employers with five or more employees cannot ask about an applicant’s conviction history until after making a conditional job offer.Source: California Civil Rights Department
• Hawaii – Employers may only consider an applicant’s conviction record after extending a conditional job offer. Additionally, they can only look at convictions from the past 10 years, excluding incarceration time. Source: Orange Tree Screening
• Connecticut – Employers cannot inquire about an applicant’s criminal history on the initial application. They may only ask after the applicant is deemed qualified for the position. Source: Patriot Software
• Minnesota – Public employers cannot ask about criminal history until the applicant has been selected for an interview or received a conditional job offer.Source: Orange Tree Screening
• New Jersey – Employers with 15 or more employees cannot inquire into an applicant’s criminal record during the initial hiring process. They may ask after the first interview or a conditional job offer. Source: Orange Tree Screening
• Oregon – Employers cannot ask about criminal history before the first interview. If no interview occurs, they must wait until after making a conditional job offer. Source: Orange Tree Screening
• Vermont – Employers cannot ask about an applicant’s criminal history on the initial job application. They may do so during an interview or once the applicant is deemed qualified for the position. Source: Orange Tree Screening

Where to Check Your State’s Laws

Laws regarding background checks and hiring vary by state and are subject to change. Before making any hiring decisions, be sure to review your state’s regulations to ensure compliance. You can find updated state-specific laws here: National Employment Law Project (NELP) – Fair Chance Hiring Laws

What Kind of Background Check Is Included with Sage Haus?

When you hire through Sage Haus, you don’t have to worry about piecing this process together, we’ve got it covered. All placements include a comprehensive criminal background check conducted after a conditional offer is made and always in accordance with state laws.

Our background check package includes:

• Identity verification
• Multi-jurisdictional criminal records search (including sex offender registries and OFAC lists)
• County-level court search covering the candidate’s current residence
• Driving history
• Federal & county civil litigation checks
• Restraining order search
• And more

This ensures you have a thorough and compliant screening process, giving you peace of mind while staying aligned with legal requirements. Learn more about our hiring services here.

---

Sage Haus Is Here to Help!

Becoming a household employer is a big step, it means you’re not just hiring help, but also taking on responsibilities like payroll, taxes, compliance, and insurance. It can feel overwhelming, but with the right knowledge and resources, you can navigate this process smoothly and legally.

At Sage Haus, we’re passionate about helping families like yours find, hire, and manage your household with confidence. 

Remember: Every state has its own rules, and regulations can change. While this guide provides a solid foundation, we always recommend consulting with a legal or tax professional to ensure you’re fully compliant with federal and state laws.

If you’re looking for a trusted household team or have questions about becoming a household employer, reach out to Sage Haus today! We’re here to simplify the process, support your hiring journey, and connect you with top-tier professionals who will make your household run seamlessly. Learn more about our hiring services here.

---

If you enjoyed this article about household employer, you might also enjoy:

• House Manager Solutions at Sage Haus: Giving You More Time for What Matters
• How to Transition Your Nanny to a Household Manager: A Step-by-Step Guide
• 5 Steps to Hiring a House Manager and Reclaiming Your Time

---

Pin-it for later: The Ultimate Guide to Becoming a Household Employer: Taxes, Payroll & Compliance Made Simple