IRS Form 1040 (Schedule H) – Household Employment Taxes – Household employment taxes, often referred to as the “nanny tax,” apply to anyone who hires domestic workers like nannies, housekeepers, gardeners, or caregivers. If you’re a household employer, IRS Form 1040 Schedule H is the key document for reporting and paying these taxes. This comprehensive guide breaks down everything you need to know about Schedule H for the 2025 tax year, including who must file, how to calculate taxes, and step-by-step filing instructions. Whether you’re new to hiring household help or need a refresher, understanding these rules can help you avoid penalties and ensure compliance.
What Is IRS Form 1040 Schedule H?
Schedule H (Form 1040) is an attachment to your individual income tax return used to report employment taxes for household employees. These taxes include Social Security, Medicare, Additional Medicare Tax (if applicable), federal income tax withholding, and Federal Unemployment Tax Act (FUTA) taxes. It’s designed for individuals who pay wages to workers performing services in or around their private home, where the employer controls the work details.
Unlike business employers who file quarterly forms like Form 941, household employers typically report these taxes annually with their personal tax return. The form helps calculate the employer’s share of taxes and any amounts withheld from employees. For 2025, the form incorporates updates like the Social Security wage base of $176,100 and no changes to core rates from prior years.
Who Qualifies as a Household Employee?
A household employee is someone you hire to perform work in your home, and you control not just what work is done but how it’s done. Common examples include:
- Nannies and babysitters
- Housekeepers and maids
- Private nurses or health aides
- Gardeners, drivers, or cooks
- Caretakers for elderly family members
Workers are not household employees if they are self-employed (e.g., they provide their own tools and offer services to the public) or hired through an agency that handles payroll taxes. Family members like spouses, children under 21, or parents may be exempt from certain taxes, but you must still evaluate based on IRS rules.
Who Must File Schedule H?
You need to file Schedule H if you meet any of these thresholds for the 2025 tax year:
- You paid cash wages of $2,800 or more to any single household employee (excluding family exemptions like children under 21 or parents providing childcare).
- You withheld federal income tax from a household employee’s wages at their request.
- You paid total cash wages of $1,000 or more in any calendar quarter of 2024 or 2025 to all household employees combined.
If a third-party (like a payroll service) handles taxes on your behalf, you may not need to file. Sole proprietors with business employees can report household taxes on forms like Form 940 or 941 instead. For Puerto Rico residents, special rules apply for wages not subject to U.S. Social Security and Medicare.
Key Tax Calculations and Thresholds for 2025
Household employment taxes consist of several components. Here’s a breakdown:
| Tax Type | Rate | Wage Base/Threshold | Notes |
|---|---|---|---|
| Social Security | 12.4% (6.2% each for employer and employee) | $176,100 per employee | Applies if $2,800+ paid to one employee. |
| Medicare | 2.9% (1.45% each) | No limit | Same threshold as Social Security. |
| Additional Medicare Tax | 0.9% (employer only) | Wages over $200,000 per employee | Withholding on excess amounts. |
| Federal Income Tax Withholding | Varies (based on Form W-4) | N/A | Optional, but required if employee requests. |
| FUTA | 6.0% (net 0.6% after up to 5.4% state credit) | First $7,000 per employee | Triggered by $1,000+ per quarter threshold. |
Cash wages include checks, money orders, or direct payments but exclude noncash benefits like meals or lodging (though these may be taxable separately). Excludable items include qualified parking (up to $325/month) or transit benefits. If you pay the employee’s share of Social Security and Medicare without withholding, you still owe the full amount.
For FUTA, check if your state is a credit reduction state, which could increase your net rate. No COVID-19 credits apply for 2025, as they expired.
Step-by-Step: How to Fill Out Schedule H?
Follow these steps based on the 2025 form:
- Enter Your Information: Provide your name, SSN, and EIN (get one free at IRS.gov/EIN if needed).
- Line A-C: Answer yes/no questions about wages paid and withholding to determine if you proceed.
- Part I (Social Security, Medicare, and Income Taxes):
- Line 1: Total cash wages subject to Social Security.
- Line 2: Multiply by 0.124.
- Line 3-4: Similar for Medicare (0.029).
- Line 5-6: Additional Medicare on excess wages (0.009).
- Line 7: Withheld income tax.
- Line 8: Total of above.
- Line 9: Check for FUTA applicability.
- Part II (FUTA): Complete Section A if state contributions were timely (line 15 × 0.006) or Section B if not (more complex calculations).
- Part III: Sum total taxes owed (line 26).
- Part IV: Address for standalone filing if no tax return required.
Use IRS Publication 926 for detailed examples.
Filing and Payment Requirements
Attach Schedule H to your Form 1040, 1040-SR, or similar by April 15, 2026. If no return is needed, file standalone and mail with payment to the IRS address for your state. Pay electronically via EFTPS or IRS Direct Pay to avoid penalties.
Also, provide Form W-2 to employees by February 2, 2026, and file W-2/W-3 with the SSA. Mark “Hshld. emp.” on W-2 if applicable. To avoid underpayment penalties, consider making estimated payments throughout the year.
Common Mistakes to Avoid
- Misclassifying workers as independent contractors (use IRS control test).
- Forgetting to get an EIN or file W-2s.
- Ignoring state unemployment taxes, which affect FUTA credits.
- Not tracking quarterly wages for FUTA thresholds.
- Overlooking family member exemptions or noncash wage reporting.
Consult a tax professional if unsure, especially for complex situations like disability payments or Puerto Rico rules.
Additional Resources and Updates
For the latest, visit IRS.gov/ScheduleH. Download the form at IRS.gov/pub/irs-pdf/f1040sh.pdf and instructions at IRS.gov/instructions/i1040sh. Publication 926 offers in-depth guidance. For 2025-specific changes, note the increased Social Security wage base and no bicycle commuting exclusion.
Staying compliant with household employment taxes not only avoids IRS penalties but also ensures your employees receive proper benefits. If you hire domestic help, review your records early to prepare for filing.