Finding a nanny or caregiver you trust takes time and effort. Figuring out how to pay them as a household employer, and what you owe in taxes is a different beast altogether – and often harder to vanquish. We’ve put together a guide to help you understand all the nuances and complexities of household employment taxes.
Let’s start with what the IRS says about what makes someone a household employer: You are a household employer if you hire someone to do household work, and you control what they do and how it’s done. Nannies, cooks, drivers, housekeepers, and caregivers are common examples. If you are a household employer, you are required to file and pay taxes for your employee, just like any other employer.
You may have heard the terms “nanny taxes” or “household employment taxes.” These terms can be confusing because there are actually multiple taxes at the federal, state, and sometimes local level that you may owe.
Here’s what each one is called, what it costs, and how to tell whether it applies to you.
At a glance: taxes for household employees
Federal household employment taxes
At the federal level, household employer taxes fall into two categories: FICA (Federal Insurance Contributions Act) and FUTA (Federal Unemployment Tax Act). FICA covers two taxes, Social Security and Medicare. FUTA is the third. Each has its own threshold and rate:
Most employers who pay their state unemployment tax in full and on time can claim a credit of up to 5.4% against the FUTA rate, which brings the effective rate down to 0.6%, or about $42 per employee.
You earn this credit by paying your full state unemployment tax by April 15 of the following year (so, for 2026 wages, by April 15, 2027). There's one exception: if your state has an outstanding federal unemployment loan balance it hasn't repaid on time, known as a "credit reduction state," your credit is smaller and your effective rate is higher than 0.6% for that year. Which states are affected changes annually. The Department of Labor publishes the current list each November, so check there, since it's a different list every year.
As a household employer, you are not obligated to withhold federal income tax. You are only required to withhold federal income tax if your employee asks you and you agree:
"You’re not required to withhold federal income tax from wages you pay a household employee. You should withhold federal income tax only if your household employee asks you to withhold it and you agree. The employee must give you a completed Form W-4.”
Doing so can be a real help to your employee, though, since it means they don't have to set aside money and pay income taxes on their own.
If you and your employee agree to withhold federal income tax, Poppins collects the W-4 at onboarding and handles the calculation and withholding for you, the same as your other required taxes. Plus, you don't need to memorize any of this to stay compliant. Poppins calculates and files your eligible federal and state taxes for you.
State household employer taxes
Beyond federal taxes, there are also state and local taxes to be aware of as a household employer. Whether or not you are subject to these taxes, and what rate you pay, typically depends on where you live.
State unemployment taxes
In most states, you become liable for state unemployment tax once you’ve paid your household employees a combined $1,000 or more in any calendar quarter – the same threshold as federal FUTA. There are two exceptions to this. In New York and Washington D.C., the threshold is $500.
The unemployment tax rate for a new employer varies by state. You can look up the rate with your state’s department of labor. Just like FUTA, this is an employer-paid tax.
State income taxes
Nine states don’t have a state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you're a household employer in one of these states, there's no state income tax to withhold.
Note: Washington taxes capital gains only, not wages, so for household employer purposes, it functions like the other eight.
Arizona is the one state that doesn't require you to withhold state income tax for household employees. In fact, Arizona law prohibits it. In every other state, if state income tax withholding applies to you (see the states with no income tax above), you'll withhold at whatever rate your state sets. You can typically find this info on your state’s department of revenue website.
Here's the top marginal rate for every state that taxes wage income, as a quick reference. Most of these states use graduated brackets, so your actual withholding rate depends on how much your employee earns; the range below spans the lowest to the highest bracket.
State disability and paid family leave
There are 13 jurisdictions, 12 states plus Washington, D.C., that require you to withhold funds from your employee to go towards paid family leave benefits.
Two states have enacted programs that aren't collecting contributions yet: Maryland (contributions start January 2027, benefits January 2028) and Virginia (contributions start April 2028, benefits December 2028). Nothing to withhold in either state right now, but worth watching if you're in MD or VA.
Rates vary by state.
There are five states that require you to withhold funds for your employee to go towards disability benefits. They are California (where the SDI withholding threshold is $750 in wages paid in a calendar quarter), Hawaii, New Jersey, New York, and Rhode Island. Rates vary by state. Check out our state resource guide to learn more about these state-specific taxes.
Local household employment taxes
In some areas, you may be subject to city-specific or other local taxes, as a household employer.
For example, in New York City and Yonkers, local income tax withholding is optional, the same voluntary structure as state and federal income tax; you and your employee can agree to have it withheld alongside NY State tax. In Pennsylvania, household employers do need to handle the state's local Earned Income Tax (EIT), the same as other PA employers — you'll register with your local tax collection district and withhold accordingly.
Check out our state resource guide to learn more about the specific taxes and rates where you live.
Taxes that don’t apply to household employers
FICA and FUTA both have thresholds: $3,000 in a year for FICA (per employee), $1,000 in a quarter for FUTA (combined across all your household employees). Stay under those, and you don't owe either tax. Income tax doesn't have a threshold the way FICA and FUTA do. It's simply never mandatory to withhold, whether federal or state, unless your employee asks you to and you agree.
And if you're in one of the nine states with no state income tax, or one of the states that doesn't require household employers to withhold state income tax, it’s not something you need to handle either.
If all of this feels like a lot to hold in your head, here’s a table to make it easier to remember.
Nanny taxes explained
Taxes for a nanny or other household employee can seem intimidating at first glance. Beyond knowing what you and your employee owe and withholding properly, there are forms to file and essential records to keep.
Luckily, services like Poppins exist to take the calculations and filing deadlines off your plate.
Useful resources
Federal tax guidance
- IRS Publication 926 — Household Employer’s Tax Guide
- Social Security Administration — Household Workers
- U.S. Department of Labor — FUTA Credit Reduction
State taxes and benefits
- Tax Foundation — State Individual Income Tax Rates and Brackets, 2026
- Bipartisan Policy Center — State Paid Family Leave Laws Across the U.S.
From Poppins Payroll
This content is for general informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional or attorney for guidance specific to your situation. Tax laws and thresholds are subject to change.
.png)