If you work as a caregiver in someone’s home, such as a babysitter, nanny, pet sitter, or nurse, you may wonder whether you’re considered an employee or a contractor. This distinction is more than just a label; it determines how your income is taxed and how your employer must report your earnings. The Internal Revenue Service (IRS) has specific guidelines to help define your employment status, and it’s important to understand them to avoid issues at tax time.
Why Employment Status Matters for Taxes
Your classification as either a household employee or an independent contractor affects your tax reporting, the forms you receive, and who is responsible for paying and withholding certain taxes. If you’re a household employee, your employer is typically required to withhold Social Security and Medicare taxes from your pay. You’ll receive a W-2 form at the end of the year. However, if you’re self-employed, you’re expected to handle these tax obligations on your own, usually with Form 1099-NEC and estimated tax payments.
What the IRS Considers a Household Employee
According to the IRS, a household employee is someone hired to perform domestic work in or around a private residence. You are considered a household employee if you perform services where the employer controls not only what work is done but also how it is done. This control aspect is critical. Even if you work part-time or through an agency, if the homeowner sets the terms of how you do your job, you’re likely a household employee.
For example, if you’re hired to provide childcare three days a week, and the family tells you exactly how to care for the children, what their schedule is, and what cleaning tasks to complete, and gives you the materials and supplies to do the work, you are a household employee. Even if an agency connected you to the job, the control exercised by the household determines your employment status.
Key Features of a Household Employee Relationship
Household employees usually work in the employer’s home under direction. This means the employer not only sets your schedule but also dictates how the job should be done. You may be required to use certain products or follow specific instructions. If you’re expected to follow a family’s household rules and structure, you’re likely working as an employee rather than an independent service provider.
The relationship may be formalized with a written agreement or informal, based on mutual understanding. Either way, the determining factor remains the employer’s control over how and when the work is performed. It doesn’t matter if the job is part-time or full-time; what matters is the level of direction given.
Differences Between Household Employees and Independent Contractors
One of the most misunderstood areas in home-based work is the line between employees and contractors. Independent contractors typically provide services for multiple clients, determine their schedule, and use their own equipment or tools. For instance, a self-employed house cleaner might bring their own cleaning products and decide when and how to clean a home. They usually offer the same services to several households.
In contrast, household employees generally work for one family, follow instructions, and use tools or supplies provided by the employer. A nanny who follows a child’s daily routine as directed by the parents and uses their car or kitchen equipment would be considered an employee.
The tax consequences of this classification are significant. Employees receive W-2 forms and have taxes withheld by the employer. Contractors receive 1099-NEC forms and are responsible for managing their own taxes. Misclassification can result in tax penalties for both parties.
Control as the Core Determining Factor
The IRS emphasizes the degree of control an employer has over a worker to determine whether someone is an employee. This control includes supervision, scheduling, instruction, and supply of tools or materials. If you must follow your employer’s guidelines closely, and your tasks and hours are directed by them, this is evidence that you are a household employee.
Let’s say you’re a caregiver who works weekdays from 8 a.m. to 4 p.m., feeding and watching children according to a schedule the family sets. You take the children to school and prepare meals based on the employer’s instructions. This is a clear example of an employment relationship because your day-to-day duties are governed by the homeowner.
However, if you offer your own childcare services to several families, choose your own hours, bring your own toys or learning materials, and make independent decisions about activities, then you’re operating as a business. This would classify you as self-employed.
Scenarios When You Are Not an Employee
Not everyone who works in someone’s home is classified as a household employee. The IRS provides exceptions based on specific factors. If you control your own schedule, bring your own tools, and set your own methods, you’re likely a contractor. Similarly, if you run a daycare out of your own residence and accept children from different families, you are self-employed.
Another example would be someone who cleans homes for multiple clients and decides which supplies to use and how to clean. Because they operate independently and are not managed directly by the homeowner, they are not household employees. Instead, they run their own business and are responsible for self-employment taxes.
A tutor who comes to a family’s home to provide academic support using their own materials, with minimal direction, is also not considered a household employee. Though the setting may be domestic, the nature of the work and level of control shift the classification.
What Jobs Count as Household Employment
There is a broad range of jobs that fall under the umbrella of household employment. Common roles include:
Babysitters and nannies who care for children in a family’s home, following daily schedules and activity guidelines set by the parents
Caretakers and health aides who assist elderly or disabled individuals with personal care, cooking, and cleaning under specific instructions
Cleaners or maids who tidy and sanitize the home according to set routines and methods
Drivers hired to transport family members using the employer’s vehicle on a pre-determined route or schedule
Gardeners or yard workers who maintain outdoor areas based on the homeowner’s expectations and tools
These roles involve working in a private residence under direct supervision or instruction. This makes the worker an employee in the eyes of the IRS, regardless of how often the work occurs.
Who Is Not a Household Employee
Some jobs that take place in or around a home don’t qualify as household employment due to their specialized nature or independent function. Examples include:
Private tutors who use their own materials and methods
Plumbers or electricians hired for one-time repairs or installations
Private secretaries who offer administrative assistance remotely or independently
Librarians offering educational services not directly related to household care
These individuals are hired for their expertise and perform tasks independently without household supervision. Therefore, they are considered independent contractors and not household employees.
Agency Workers and Household Employment
Some workers are placed by agencies, but that doesn’t automatically remove household employer responsibilities. If the family supervises and directs the individual once placed, the IRS may still view the household as the employer. The key issue is whether the family has control over the services performed.
Agencies may handle payroll, background checks, and initial interviews, but if the caregiver becomes integrated into the daily household with defined duties and hours set by the family, that person becomes a household employee. In this case, the family may be responsible for issuing a W-2 and withholding taxes, unless the agency remains the legal employer and handles those responsibilities entirely.
Household Employment and Wages
Being a household employee means you’re paid directly by a family or individual who is responsible for reporting your wages to the IRS. If you earn $2,700 or more in tax year 2024 (rising to $2,800 in 2025), your employer is required to issue you a Form W-2 and withhold FICA taxes. This ensures that your Social Security and Medicare contributions are made properly and that your wages are reported for income tax purposes.
Unlike independent contractors, you do not need to submit a 1099 form if you are an employee. If you receive a 1099-NEC from someone who supervises your work in their home, this may be a sign that you were misclassified, and you should seek guidance to correct your filing status.
Tax Responsibilities for Household Employees
When you are classified as a household employee, specific tax rules apply to both you and your employer. The most important of these involve the collection and payment of Social Security and Medicare taxes, also known as FICA taxes. Understanding how these taxes are calculated, reported, and paid is essential to staying compliant with federal and state tax laws.
Social Security and Medicare Withholding
As a household employee, your employer is required to withhold a portion of your wages for Social Security and Medicare taxes. This is part of the FICA tax system. In addition to withholding your share of these taxes, the employer must also pay an equal portion from their own funds. This ensures that you are contributing to your future Social Security and Medicare benefits, just like employees in more traditional workplace settings.
If your employer fails to withhold these taxes or does not issue a Form W-2, it can create complications at tax time. You may be left responsible for paying the full amount of these taxes yourself, along with any potential penalties and interest for underpayment. This is why it’s crucial to understand your status and communicate with your employer to ensure taxes are being handled correctly.
Income Tax Withholding and Form W-4
Unlike FICA taxes, household employers are not required to withhold federal income tax from your paycheck unless you request that they do so. If you want your employer to withhold income tax on your behalf, you need to complete and submit Form W-4. This form provides the information necessary to calculate how much federal income tax should be withheld based on your filing status, dependents, and other adjustments.
Many household employees find that requesting income tax withholding helps them avoid surprises at tax time. If your employer agrees to withhold income tax, the amounts withheld will be included on your Form W-2 and will count toward your total federal tax payments for the year.
If your employer does not withhold income taxes, you are responsible for paying them yourself. This is usually done through estimated tax payments made four times a year. These payments cover both federal and, if applicable, state income taxes. Failing to make these payments can result in underpayment penalties and additional tax due when you file your return.
Filing Requirements for Household Employees
If you are a household employee, you are required to file a federal income tax return if your earnings exceed the standard filing thresholds for the year. Your Form W-2 will report the total amount of wages you received and the taxes withheld. You use this form to complete your tax return and determine whether you owe additional tax or are due a refund.
Even if you are not required to file based on your income level, you may still want to file a return to receive a refund of any withheld taxes or to claim credits you are eligible for, such as the Earned Income Tax Credit or the Child and Dependent Care Credit. These credits can significantly reduce your tax liability or increase your refund, especially for lower-income workers.
The Nanny Tax Explained
The term “nanny tax” refers to the taxes that must be paid when someone hires a household employee. This includes not only the FICA taxes discussed earlier but also federal and state unemployment taxes. Employers are responsible for paying the employer portion of FICA, along with their share of unemployment taxes.
The nanny tax is not a separate tax but rather a set of obligations that come with employing someone in your home. Household employers must track wages paid, withhold the proper taxes, and file the necessary paperwork to report and remit these amounts. For employees, this means receiving a W-2 form and ensuring that the taxes withheld match what is reported to the IRS.
For tax year 2024, if a household employee earns $2,700 or more from one employer, that employer must comply with nanny tax requirements. The threshold increases to $2,800 for 2025. These thresholds are adjusted periodically for inflation, so it’s important to verify the correct amount each year.
Estimated Tax Payments for Household Employees
If your employer does not withhold income tax from your pay, you are responsible for making estimated tax payments to the IRS. These payments are typically due in April, June, September, and January. They cover the federal income tax you owe on your earnings as well as any self-employment or state taxes you may be required to pay.
Estimated tax payments are made using IRS Form 1040-ES. You’ll need to calculate how much tax you expect to owe for the year and divide that amount into four equal payments. If your income is irregular or seasonal, you may need to adjust your payments accordingly. Keeping good records of your earnings and any taxes paid is essential to avoiding underpayment penalties.
Many tax preparation tools allow you to set up automatic payments to the IRS, making it easier to stay on schedule. Some states also require estimated tax payments, so be sure to check your state’s requirements.
Identification Numbers and Tax Reporting
To properly report your earnings as a household employee, you must provide your employer with either a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN). This number is used to prepare your W-2 form and report your income to the IRS.
If you do not have an SSN or ITIN, you can apply for one through the Social Security Administration or IRS, respectively. Without an identification number, your employer cannot issue a W-2 form, and your income may not be properly reported. This can create challenges when filing your tax return or applying for government benefits tied to your reported earnings.
It is important to verify that your employer has your correct information on file, including your legal name and identification number. Mistakes can result in delays or discrepancies with the IRS, potentially impacting your ability to file a return or receive a refund.
Schedule H and Employer Tax Filing
While household employees are not responsible for filing Schedule H, it’s helpful to understand its purpose. Schedule H is a tax form used by household employers to report wages paid to employees and the taxes withheld or paid on their behalf. The form is filed with the employer’s personal tax return and details the amount of Social Security, Medicare, and unemployment taxes owed.
Your employer must file Schedule H if they paid you at least the wage threshold for the year and withheld or paid any employment taxes. This form helps the IRS match the information on your W-2 with the employer’s records. If your employer fails to file Schedule H, it could cause discrepancies in your tax records.
You can ask your employer if they are planning to file Schedule H and ensure your W-2 matches the wage amounts they report. Keeping your own records of hours worked and wages received can also help prevent problems later.
Misclassification and Corrective Steps
In some cases, household workers may be incorrectly classified as independent contractors instead of employees. This can happen when employers issue a 1099-NEC instead of a W-2. If the employer supervises your supplies and follows their instructions, you are likely an employee under IRS rules and should receive a W-2.
If you believe you’ve been misclassified, you can take steps to correct it. One option is to file IRS Form SS-8, which asks the IRS to determine your correct employment status. Another approach is to contact your employer and request that they issue a corrected form. Misclassification can lead to unpaid taxes, interest, and penalties, so it’s important to address the issue promptly.
Workers who are misclassified may also be denied benefits such as unemployment insurance, Social Security contributions, and eligibility for tax credits. Ensuring proper classification helps protect your rights and financial stability.
Importance of Keeping Accurate Records
As a household employee, it’s essential to keep thorough records of your hours worked, wages received, and any taxes withheld. This documentation will help you prepare your tax return, verify the accuracy of your W-2, and resolve any disputes with your employer or the IRS.
You should maintain a personal log of the dates and times you worked, any overtime or bonuses received, and copies of pay stubs or payment receipts. If your employer provides you with a pay schedule or time sheet, retain a copy for your records.
Keeping records is especially important if you need to prove your income for financial aid applications, loan approvals, or public assistance programs. Your reported income can also affect your eligibility for certain tax credits, such as the Earned Income Tax Credit or the Premium Tax Credit.
When and How to File Your Tax Return
As a household employee, you must file a tax return by the annual tax deadline, typically April 15. Your W-2 form will contain all the information needed to report your income, including wages, Social Security and Medicare taxes withheld, and any federal or state income tax withheld.
You can file your return electronically or by mail. Filing electronically is generally faster and allows you to receive your refund more quickly. If you owe additional taxes, you can pay online, by check, or through an automatic withdrawal from your bank account.
Before filing, review your W-2 form carefully to ensure all information is accurate. If you notice any errors, contact your employer immediately to request a corrected W-2. Filing with incorrect information can delay your refund or trigger an audit.
Common Roles That Qualify as Household Employment
Household employment covers a wide variety of domestic roles. If your work takes place inside or around a private residence and you are under the control or direction of the person hiring you, you likely qualify as a household employee. These roles include both full-time and part-time positions and can be either live-in or non-live-in arrangements.
Caregivers, such as nannies, babysitters, and personal aides, are some of the most common examples. They work in a family’s home and follow routines, instructions, and expectations that the employer provides. Similarly, housekeepers, maids, and cleaners are often directed by homeowners in how to maintain cleanliness, manage laundry, or handle household organization. When these tasks are done under the employer’s direct supervision or on a fixed schedule set by the employer, the worker is a household employee.
Other roles such as cooks, butlers, gardeners, and chauffeurs may also be classified as household employees if their services are performed primarily for the benefit of the employer’s household and not offered as part of a broader business or freelance service. As long as the homeowner controls what the job is and how it’s performed, the relationship fits the household employment model.
Determining Control in the Employment Relationship
The IRS uses a control test to determine whether someone is an employee. This test looks at behavioral control, financial control, and the nature of the relationship between the worker and the employer. Behavioral control refers to whether the employer has the right to direct and control the work, even if that control is not exercised regularly. For example, giving a schedule, requiring tasks to be performed in a specific order, or training someone on how to do the work are signs of behavioral control.
Financial control includes whether the employer supplies tools or equipment, reimburses expenses, or determines how the worker is paid. If the worker has little opportunity for profit or loss, and they are paid hourly or on a salary basis, it supports employee status. The nature of the relationship considers whether there is a written contract, whether the worker receives employee-type benefits, and how permanent the relationship is.
When all three categories point toward the employer having significant control, it is very likely the IRS will consider the worker a household employee. Understanding these distinctions helps both workers and employers avoid classification errors.
Examples of Employee vs Contractor Situations
To better understand how classification works in practice, consider a few typical situations. A nanny who works in one family’s home every weekday from 9 a.m. to 5 p.m., following the parents’ instructions and using their equipment and supplies, is a household employee. The family sets the schedule, provides meals for the children, and evaluates how the nanny is performing. There is behavioral and financial control, and the relationship is continuous and structured.
In contrast, a house cleaner who provides services to multiple homes, brings their own cleaning products, and chooses when to visit each house is likely an independent contractor. This worker advertises their own services, determines their rates, and is responsible for their own tax payments and business expenses. There is no employer direction or long-term exclusive relationship with a single client.
Another example is a private nurse hired through an agency to care for an elderly family member. If the nurse is managed and paid by the agency, then the agency is the employer. But if the family directs the nurse’s daily routine and pays them directly, then the family becomes the household employer.
When You Work for Multiple Families
If you work for more than one household, your classification depends on how each individual relationship is structured. For instance, a nanny who works for one family three days a week and another family two days a week could be a household employee for both families if each one controls her schedule and duties during their respective days. In this case, both households must treat her as an employee and follow the appropriate tax procedures, including issuing separate W-2 forms.
However, if the nanny sets her own schedule, decides how to care for the children, and brings her own supplies, she may be considered self-employed. This would be especially true if she markets herself as a business and is available to new clients. The more control she exercises over her work and decisions, the more likely she is an independent contractor.
It is possible for someone to be classified as both an employee and a contractor in the same year depending on the specific nature of each job. In such cases, it is important to keep detailed records of the work done for each household and the manner in which that work was performed.
Household Workers Hired Through Agencies
The involvement of a staffing or placement agency can complicate household employment classification. Some agencies operate as the legal employer and handle all aspects of payroll, tax withholding, and supervision. In such cases, the household receives a service but is not the employer of the worker. This is common for temporary care arrangements or rotating schedules where the worker reports to the agency and follows agency policies.
Other agencies function only as placement services and leave supervision and payment to the hiring family. In these cases, the family becomes the household employer and must handle taxes and reporting requirements directly. The worker is considered a household employee even if they were introduced through an agency.
It is important for families and workers to clarify the nature of the relationship with the agency. If the family signs a contract with the agency but then manages the employee directly and issues payments, they must understand their responsibilities as household employers under the law.
Misclassification Risks and Consequences
Misclassifying a household employee as an independent contractor can have serious tax consequences. For the worker, this may mean paying the full amount of Social Security and Medicare taxes that should have been split with the employer. It may also affect eligibility for unemployment insurance, workers’ compensation, and certain tax credits.
For the employer, misclassification can result in penalties, back taxes, and interest. If the IRS audits and determines that the classification was incorrect, the employer may be liable for unpaid employer taxes, fines, and legal fees. The IRS does offer voluntary correction programs that allow employers to come into compliance without full penalties, but it is always better to handle classification correctly from the start.
To avoid risk, employers and employees should document their working relationship, clearly define duties, and follow all appropriate tax procedures. Consulting a tax professional or employment law expert can also help prevent costly mistakes.
Understanding Domestic Worker Rights
As a household employee, you may be entitled to certain legal protections under both federal and state laws. These protections include minimum wage, overtime pay, and safe working conditions. The Fair Labor Standards Act requires that most domestic workers be paid at least the federal minimum wage and receive time-and-a-half for overtime worked beyond 40 hours in a week.
Some states and cities have expanded protections for household workers, including mandatory rest breaks, paid sick leave, or written contracts. California, New York, and Massachusetts are among the states that have passed Domestic Workers’ Bills of Rights to ensure fair treatment and clear employment standards.
Household employees who are not aware of their rights may be at risk of wage theft or unsafe conditions. Employers should be informed of their obligations, and employees should keep records of hours worked, wages received, and any agreements made. If disputes arise, labor departments or legal aid organizations may be able to assist.
Filing and Receiving Form W-2
As a household employee, you should receive Form W-2 from each employer who paid you $2,700 or more in wages in tax year 2024, or $2,800 in 2025. This form details your total wages, Social Security and Medicare taxes withheld, and any federal or state income taxes withheld.
The W-2 form is used to complete your personal income tax return. It also helps ensure your earnings are reported to the Social Security Administration, which tracks your future eligibility for retirement and disability benefits. It’s important to check your W-2 for accuracy and report any errors to your employer as soon as possible.
Employers must send W-2 forms to employees by January 31 of the following year. If you do not receive your W-2 by this date, you should contact your employer. If they fail to provide one, you may still file your return using Form 4852, which allows you to estimate your wages and withheld taxes.
Documentation for Tax and Legal Purposes
Maintaining accurate documentation is one of the most effective ways to protect yourself as a household employee. Good recordkeeping ensures that your income is correctly reported, helps in preparing your tax return, and provides proof of employment if needed for loan applications, housing, or government benefits.
You should maintain a personal employment file that includes dates of work, hours worked each week, rates of pay, and any communication with your employer regarding wages or schedule changes. You should also keep copies of pay stubs, bank deposit records, or written agreements. If you receive payments in cash, you should record the date, amount, and who paid you.
Keeping organized records can also help in case of tax audits or wage disputes. If your employer fails to report your income, your records may be necessary to claim your earnings and pay the correct taxes.
Planning Ahead for Year-End Taxes
As the year progresses, it’s important to stay on top of your tax situation to avoid surprises when tax season arrives. Review your pay stubs to see if the correct amount of taxes is being withheld, or calculate how much you need to set aside if you are paying estimated taxes yourself. Update your Form W-4 if your personal or financial situation changes, such as getting married or having a child.
If you qualify for any tax credits or deductions, gather documentation early to avoid scrambling during filing season. Keep receipts for any eligible expenses, such as training or certification costs, if your state allows deductions for unreimbursed work-related expenses. You may also want to explore retirement savings options or health coverage if offered through a family plan or supported by your state.
Preparing early and staying organized can reduce stress, ensure compliance, and possibly maximize your tax refund.
State-Level Tax Rules for Household Employees
In addition to federal tax requirements, household employees should be aware of their state’s tax rules. Most states have their own guidelines for income tax withholding, unemployment insurance, and disability insurance, which apply when you work in someone’s home. These rules can vary widely, so it is important to check the laws in the state where you work. Some states require household employers to register with the state and pay unemployment insurance taxes. This ensures that employees are eligible for unemployment benefits if their job ends. A few states also mandate that employers provide workers’ compensation coverage, which protects employees in case of injury on the job.
If your employer is subject to these requirements, they are responsible for reporting your wages to the state and paying the necessary taxes. As an employee, you should receive a state equivalent of a W-2 form or other wage documentation to help you file your state income tax return. You may also be required to pay state income tax directly if your employer does not withhold it. Staying informed about your state’s rules ensures you comply with all obligations and understand your rights as a worker.
Rights to Unemployment and Workers’ Compensation Benefits
One of the benefits of being classified as a household employee is potential eligibility for unemployment insurance and workers’ compensation. Unemployment insurance provides financial assistance if you lose your job through no fault of your own, such as when a family no longer needs your services. To qualify, your employer must have paid unemployment taxes on your behalf, which is often required by state law once wages exceed a certain threshold.
Workers’ compensation is designed to cover medical expenses and lost wages if you’re injured on the job. This might include slipping while cleaning, sustaining a back injury from lifting a client, or experiencing illness due to job-related exposure. Coverage requirements vary by state, and not all household employers are required to provide it, especially if you work part-time or your wages fall below the state’s limit.
Understanding whether your employer has provided these benefits is important. If not, you could be personally responsible for medical costs or have limited options for assistance if you lose your job unexpectedly.
When You Work Off the Books
Unfortunately, some household employers pay their workers off the books, meaning they do not report wages or withhold any taxes. While this may seem convenient at first, it can lead to serious problems for the employee. Working off the books means your income is not reported to the IRS or the Social Security Administration, so you lose out on Social Security credits, unemployment benefits, and proof of income for loans or public assistance.
In addition, if you fail to report off-the-books income on your own tax return, you may be subject to penalties and back taxes. Even if your employer did not withhold taxes or issue a W-2, you are still legally responsible for reporting your earnings. You can do this using Form 1040 and calculating your tax owed based on your total income.
If you are working for someone who is not reporting your income properly, consider discussing the issue with them. Many employers are unaware of their responsibilities and may be willing to correct the situation. It is in both parties’ best interest to comply with tax laws to avoid future complications.
Reporting Income Without a W-2
If you worked as a household employee but did not receive a W-2 form, you are still required to report your income when you file your taxes. In this case, you can use IRS Form 4852 to estimate your wages and taxes withheld. You will need to provide as much information as possible, including your employer’s name and address, dates of employment, and how much you were paid.
Keeping a personal record of your hours, paychecks, and communication with your employer can help you fill out this form accurately. While it is not ideal to report income this way, the IRS allows it when your employer has failed to issue the required tax forms.
It is also a good idea to contact your employer and request a proper W-2. Remind them that household employers are legally required to provide wage statements to their employees. Filing your return without a W-2 may delay processing and your potential refund, so it is best to obtain one if possible.
Tax Credits That May Apply to Household Employees
While household employees have limited deductions compared to self-employed workers, you may still qualify for certain valuable tax credits. For example, the Earned Income Tax Credit is available to low and moderate-income workers and can provide a significant refund even if you do not owe any taxes. Your eligibility depends on your income, marital status, and number of dependents.
Another credit to consider is the Child and Dependent Care Credit. If you pay for child care so that you can work, you may qualify for a credit based on your expenses. However, this credit is more relevant to your employer if they are the ones paying for child care. Still, understanding how it works can help you in future situations if you transition to self-employment or pay for child care yourself.
You may also qualify for the Premium Tax Credit if you purchased health insurance through the federal marketplace and meet the income criteria. These credits can help reduce your tax burden and increase your refund, so it is worth exploring them during tax season.
Understanding Limitations on Tax Deductions
As a household employee, you generally cannot deduct unreimbursed work-related expenses on your federal tax return. This includes costs like commuting, work uniforms, or supplies you purchase yourself. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for miscellaneous itemized expenses, which included many of these types of costs.
Some states still allow deductions for unreimbursed employee expenses, but these are typically limited and depend on your adjusted gross income. For example, California allows a deduction for certain expenses, but only when they exceed a certain percentage of your income.
If your job requires you to make purchases or cover costs out of pocket, consider discussing reimbursement with your employer. While you cannot deduct these expenses federally, your employer may be able to deduct them as part of their household employee costs. Open communication about expenses can help avoid confusion and ensure both parties are treated fairly.
Recordkeeping for Tax Filing and Legal Protection
Keeping detailed and accurate records is one of the most important things you can do as a household employee. Your records will help ensure you file an accurate tax return, claim the correct credits, and resolve any disputes with your employer or tax authorities.
Start by logging your hours and wages each time you work. Maintain a notebook or digital spreadsheet with dates, hours worked, payments received, and any taxes withheld. If your employer pays you by check or direct deposit, save your bank records. If you are paid in cash, ask for written receipts or create your own records immediately after receiving payment.
In addition to payment records, keep any correspondence you have with your employer regarding your job duties, schedule, or wage changes. If you sign a contract or are given an employee handbook, save copies of these documents. Good records can be critical if you need to verify your income for housing applications, health insurance, or future employment opportunities.
Communicating With Your Employer About Taxes
Many misunderstandings between household employees and employers stem from a lack of communication. It is important to have clear conversations about your classification, wage reporting, and tax responsibilities. Ask your employer if they plan to issue you a W-2 and withhold taxes from your paycheck. If not, discuss how you can handle your tax obligations on your own and request help gathering the necessary income documentation.
You should also discuss any benefits they may offer, such as paid time off, sick leave, or holiday pay. Some families may be open to formalizing your role with a written agreement that outlines expectations and pay structure. A written agreement can provide clarity for both sides and help avoid future disputes.
Being proactive and professional in your communication can go a long way toward building a respectful and mutually beneficial working relationship.
Planning for Retirement and Social Security
One major benefit of being classified as a household employee is that your Social Security and Medicare taxes contribute to your future retirement benefits. These taxes are not optional and must be paid by both you and your employer. Over time, your contributions help you qualify for Social Security retirement, disability, and survivor benefits.
To qualify for Social Security benefits, you must earn enough credits through your work history. In 2025, you earn one credit for every $1,730 in wages, and you can earn up to four credits per year. Most workers need 40 credits to qualify for retirement benefits. If your employer fails to report your income, these earnings won’t count toward your record, which can hurt your future eligibility.
You can track your earnings and credits by creating an account with the Social Security Administration. Check your record periodically to make sure your wages are being reported correctly. If you notice missing income, talk to your employer or submit a correction through the appropriate channels.
The Importance of Understanding Your Classification
Knowing whether you are a household employee or an independent contractor is essential to handling your taxes correctly and protecting your rights. Misclassification can affect your ability to qualify for benefits, contribute to Social Security, and receive unemployment compensation. It can also create confusion and stress at tax time.
Review the nature of your working relationship carefully. Consider who sets your schedule, provides tools or supplies, and directs your day-to-day tasks. If your employer controls how and when you work, you are most likely a household employee and should be treated as such for tax purposes.
Being informed allows you to take action if needed, whether that means requesting a W-2, adjusting your tax payments, or correcting a misclassification with your employer or the IRS. Awareness is your best tool for ensuring fair treatment and financial security.
Final Thoughts
Household employees perform essential work that supports families and individuals in their homes. Whether you are a nanny, caregiver, housekeeper, or gardener, you have rights and responsibilities under federal and state tax laws. Understanding your employment classification, maintaining clear communication with your employer, and staying organized with your records are key to managing your tax responsibilities and ensuring that you receive the benefits you are entitled to.
If you are ever uncertain about your classification or tax situation, consider speaking with a qualified tax advisor or labor rights organization. Taking the time to understand the system can help you avoid complications and make the most of the work you do.