Blog · 14 October 2026

Nanny Tax 2026: Household Employment Taxes and Paid Family Caregivers (Tax Tip 2026-70) — What US CPA Firms Should Tell Clients

By Keshav Bansal, CA

Nanny tax and household employment taxes catch clients who never think of themselves as employers. Paying a nanny, housekeeper or in-home caregiver can trigger Social Security, Medicare and federal unemployment tax, plus Form W-2 and Schedule H. Two IRS sources frame the 2026 rules: IRS Tax Tip 2026-70 (September 22, 2026), which covers family members paid to care for a relative, and Publication 926 (2026), Household Employer’s Tax Guide. For US CPA firms, the work is spotting these clients early and getting the paperwork right.

Who counts as a household employee

Pub. 926 uses a control test: a worker is your employee if you control not only what work is done but how it is done. Part-time vs full-time, hourly vs by the job, or hiring from an agency list doesn’t change that. Topic no. 756 lists housekeepers, maids, babysitters and gardeners as typical household employees.

A self-employed worker usually provides their own tools and offers services to the public. If an agency provides and controls the worker, or childcare is in the worker’s home, the worker generally isn’t the family’s employee.

Tax Tip 2026-70: paid family caregivers

Tax Tip 2026-70 covers relatives paid to care for an elderly or disabled family member: the in-home caregiver is generally the employee and the care recipient the employer.

Employment taxes may not be owed when the caregiver is:

• the care recipient’s spouse;
• their child under age 21;
• their parent, unless an exception applies; or
• an employee under age 18 at any time during the year, unless an exception applies.

Per Tax Tip 2026-70, even when no employment taxes are owed, caregiver compensation is still reported on Form W-2 (see Table 1, page 5 of Pub. 926).

Non-employee caregivers still report income on Form 1040 or 1040-SR. Tip examples without SE tax include insurer pay to care for a spouse, and state-agency pay to a grandparent for grandchildren. SE tax may apply if they run a care business (Schedule C and SE on the full payment).

Under Notice 2014-7 (as Pub. 926 notes), certain Medicaid waiver payments are excludable from income.

The 2026 numbers from Pub. 926 and Topic 756

• FICA threshold: once a family pays one household employee $3,000 or more in cash wages in 2026, all of that employee’s cash wages are subject to Social Security and Medicare tax.
• Rates: 15.3% in total, 7.65% each from employer and employee (6.2% Social Security plus 1.45% Medicare). The employer can withhold the employee’s share or pay it from its own funds.
• Wage base: the Social Security wage base limit is $184,500 for 2026. Medicare has no wage base limit.
• FUTA: applies if the family pays total cash wages of $1,000 or more to household employees in any calendar quarter of 2025 or 2026. The tax is generally 6% on the first $7,000 of each employee’s cash wages, less a state unemployment credit of up to 5.4%. FUTA is paid by the employer and is not withheld from wages.
• Income tax withholding: not required. If the employee asks and the employer agrees, the employee completes Form W-4.

If a nanny asks for withholding, use the Form W-4 process covered in our note on the draft 2027 Form W-4.

Filing: EIN, Form W-2 and Schedule H

A household employer who has to file needs an employer identification number (EIN), the employee’s Social Security number, and Form W-2 with Form W-3. For 2026 wages, Pub. 926 says to give the employee Copies B, C and 2 of Form W-2, and file Copy A with Form W-3 with the SSA, by February 1, 2027. Schedule H (Form 1040) is filed with the 2026 federal income tax return by April 15, 2027. An extension of the return also extends Schedule H, but the taxes are added to the client’s income tax, so plan withholding or estimates.

Don’t confuse household W-2s with contractor reporting: an employee babysitter isn’t moved onto a 1099 because pay is under the Form 1099-NEC $2,000 threshold. Employee status comes first.

Don’t miss the dependent care credit

Pub. 926 notes that when a household employee cares for a dependent under 13, or a spouse or dependent who can’t care for themselves, so the client can work or look for work, the qualifying expenses for the child and dependent care credit can include the wages and the employer’s share of federal and state employment taxes.

A practical checklist for CPA firms

• Add a household-worker question to organizers: “Did you pay anyone to work in or around your home, or to care for a family member?”
• Apply the control test and note in the file whether the worker is an employee, an agency worker or an independent business.
• Check family relationships and ages (spouse, child under 21, parent, under 18) before computing FICA and FUTA.
• Total cash wages per employee against the $3,000 FICA threshold, and by quarter against the $1,000 FUTA test.
• Confirm an EIN and the employee’s SSN, and put the February 1, 2027 W-2 date in your calendar.
• Prepare Schedule H and adjust 2026 estimates or withholding so the added tax doesn’t produce a penalty.
• Ask caregiver clients about the payment source (insurer, state agency, Medicaid waiver) and whether they run a care business that needs Schedule C and SE.
• Capture dependent care credit data, including the employer taxes paid.
• Clients who can’t pay back taxes: see IRS payment plans and other collection alternatives.

Where this fits for Tax Brew readers

The nanny tax is small dollars but heavy on detail: relationship tests, quarterly wage totals, a W-2 for a non-business employer and a Schedule H tied to the 1040.

If household payroll schedules, Schedule H drafts or organizer follow-ups are taking your team’s time, outsourced tax prep and bookkeeping support for US CPA firms can handle the data gathering and draft schedules while your signing professionals keep the judgment calls. Email info@taxbrewglobal.com.

Check current IRS guidance: this article summarizes IRS Tax Tip 2026-70 (September 22, 2026), Publication 926 (2026), Household Employer’s Tax Guide (irs.gov/publications/p926; PDF at irs.gov/pub/irs-pdf/p926.pdf) and IRS Topic no. 756. Thresholds, wage bases and due dates change each year. Confirm the current Pub. 926 and Schedule H instructions before advising clients. This is general information, not tax or legal advice. Sources as of 14 October 2026.