Hiring a household manager: what it means to become a household employer in 2026

A household that hires a household manager, house manager, or personal assistant usually thinks of it as a staffing decision. The tax system treats it as something else: the household has become an employer. That brings federal and state payroll obligations, a new schedule on the individual return, and records that have to hold up if the IRS or a state unemployment agency asks.

This post covers what changes for tax purposes when a household hires a manager or other domestic employee, the 2026 thresholds, and the records to set up before the first paycheck. It is not hiring advice, it does not cover how to find or evaluate a candidate, and it is not employment law advice. Wage and hour rules, contracts, and immigration questions belong to an employment attorney.

Is the person your employee?

For tax purposes, a worker is your household employee if you control not only what work is done but how it is done. IRS Publication 926 is the guide. A house manager who works on your schedule, at your homes, following your instructions, is almost always an employee, even if the person asks to be paid as a contractor.

Two exceptions matter:

• Agency workers. If an agency provides the worker and controls the work, the worker may be the agency's employee. A placement agency that only finds the person and collects a fee does not make the worker its employee. The household is still the employer.
• Independent businesses. A cleaning company, landscaper, or pool service that serves many clients with its own tools and staff is usually not your employee.

If the answer is unclear, Form SS-8 asks the IRS to decide, though it takes months. Most households decide with their preparer and document the reasoning.

The 2026 thresholds

• Social Security and Medicare: if you pay any one household employee $3,000 or more in cash wages in 2026, you owe 7.65% employer tax and must withhold 7.65% from the employee (6.2% Social Security plus 1.45% Medicare). Social Security applies up to the $184,500 wage base for 2026.
• Federal unemployment (FUTA): if you pay total cash wages of $1,000 or more in any calendar quarter of 2025 or 2026 to household employees, you owe FUTA on the first $7,000 of each employee's wages. The rate is 6%, generally reduced to 0.6% with credit for state unemployment tax paid on time.
• Federal income tax withholding: not required for household employees unless the employee asks and you agree. If you both agree, use the employee's Form W-4.
• Additional Medicare tax: withhold an extra 0.9% on wages over $200,000 paid to one employee in the year.

Wages paid to your spouse, your child under 21, your parent, or an employee under 18 (with some exceptions) are treated differently. Check Publication 926 before excluding anyone.

Where it shows up on your return

Household employment taxes are reported on Schedule H, filed with your Form 1040. For 2026 wages, that is the return due April 15, 2027. Because the tax is paid with your individual return, you should cover it during the year by increasing your own withholding or estimated payments. Otherwise the household payroll tax can create an underpayment penalty on your personal return.

If the employee is paid through a business you own, the business reports the wages on its own Forms 941 and 940 instead. That choice has to match reality: the business can deduct wages only for work done for the business.

Accounts to open before the first paycheck

• An employer identification number (EIN) for the household employer. You cannot use your Social Security number on Forms W-2.
• State withholding account, if your state has an income tax.
• State unemployment account. Most states require household employers to register once they pass the state threshold, and state unemployment is usually filed quarterly even though federal is annual.
• Workers' compensation coverage, where the state requires it for domestic employees. This is an insurance and state law question, but the policy is a record your preparer may ask about.
• State disability or paid family leave, in states that have them.

Paperwork from the employee

• Form I-9 for employment eligibility, completed by the end of the third business day of work. Keep it separately from tax records.
• Form W-4, if you agreed to withhold income tax, and any state withholding certificate.
• State new hire report, filed within 20 days of the start date under federal rules (some states require it sooner).
• A written statement of pay, including the hourly rate or salary, how overtime is handled, and what benefits are provided.

Pay items that change the tax math

• Paying the employee's share yourself. Some households pay the employee's 7.65% instead of withholding it. That is allowed, but the amount you pay counts as additional wages for income tax and goes in box 1 of the W-2.
• Health insurance. Premiums the household pays directly for an employee's health coverage, or reimburses against proof of coverage, are generally excluded from the employee's wages. A flat cash stipend with no proof is taxable wages.
• Transit and parking. For 2026, up to $340 a month each for qualified parking and for transit passes can be excluded from wages when the employer provides them.
• Meals and lodging. Lodging on your premises that the employee must accept as a condition of the job, for your convenience, can be excluded from wages. Otherwise its value is taxable. A later post in this series covers live-in staff.
• Bonuses and gifts. Holiday bonuses and cash gifts to employees are wages. So are gift cards.
• Cars and phones. A household car the employee uses for personal driving, or a phone plan the household pays, can create taxable value. Keep a use log or a written policy.

Year-end filings

For 2026 wages:

• Give the employee Form W-2 and file Forms W-2 and W-3 with the Social Security Administration by February 1, 2027 (January 31 falls on a Sunday).
• File Schedule H with your 2026 Form 1040.
• File state annual reconciliations as your state requires.

Payroll service or do it yourself?

Many households use a payroll service that specializes in household employers. It files the state returns, prepares W-2s, and calculates withholding. It does not remove your responsibility. If the service fails to deposit the tax, the IRS and the state still look to you. Ask for copies of every filing and confirm the deposits appear on your IRS account.

The scored diagnostic

Score each item 0, 1, or 2. Zero means not done. One means started or unclear. Two means done and documented.

Item	0, 1, or 2
Employee or contractor status is decided and documented
Household employer EIN obtained
State withholding and unemployment accounts opened
Workers' compensation and any state disability coverage confirmed
I-9, W-4, and state new hire report completed on time
Written pay terms in the file
Personal withholding or estimates raised to cover Schedule H
Payroll service filings are copied to the household file

A total of 13 to 16 means the household is set up correctly. A total of 8 to 12 means one or more accounts are missing. Below 8, talk with your preparer before the next paycheck.

Illustrative: a full-time house manager

Illustrative: A couple hires a full-time house manager at $110,000 a year, starting March 1, 2026. Cash wages for 2026 are about $91,700. They owe 7.65% employer Social Security and Medicare (about $7,010) and withhold the same amount from the manager. FUTA applies to the first $7,000, which is $42 at the 0.6% net rate if state unemployment is paid on time. The manager asks for federal income tax withholding, and the couple agrees and uses the W-4. They register with the state, raise their own estimated payments to cover the Schedule H amount, and give the manager a W-2 by February 1, 2027.

Who owns what

• The household: the hiring decision, written pay terms, and collecting the forms.
• Your preparer: Schedule H, estimated payments, and the classification analysis.
• The payroll provider: state filings, W-2s, and deposits.
• An employment attorney: wage and hour rules, contracts, and immigration questions.

Next step: before the offer goes out, get an EIN and confirm with your preparer which state accounts you need.

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Educational only. This is not tax or legal advice for your situation. Consult your own CPA, EA, or attorney before acting.