2026 tax year
Household employer taxes and deductions
If you pay someone $3,000 or more in 2026 to work in your home, a nanny, a housekeeper, a carer, you are their employer. Not their client, not a hirer of a contractor. Their employer, with Social Security and Medicare to withhold and to match.
It is 6.2% plus 1.45% taken from their pay and the same again from you, reported on Schedule H filed with your own Form 1040 rather than on any business return. Unemployment tax is a separate test at $1,000 in any quarter, not the $3,000 one. Calling the arrangement contracting almost never survives scrutiny, because you control how the work is done in your own home. And getting it wrong surfaces years later when the worker claims unemployment or Social Security credit. Note this is a household obligation, not a business deduction: none of it is deductible unless the care qualifies you for the dependent care credit.
The rest of the household employer deduction list
Ordinary and necessary business expenses, deductible in full in the year you pay them, provided they are genuinely for the business:
- Staff wages
- Your share of payroll taxes
- Payroll service
- Workers’ compensation insurance
- Background check fees
- Recruitment costs
- Insurance
- Professional fees
Worth knowing
Paying someone to work in your home makes you an employer with payroll obligations, filed on your own tax return rather than a business one.
That is what is specific to this trade. The larger deductions are the universal ones, see the full checklist.
What each deduction is worth to you
On $100,000 of profit with no state income tax, $1,000 deducted saves $305, 30.5%, because it comes off self-employment tax and income tax together:
| Net profit | Saved per $1,000 deducted | Effective |
|---|---|---|
| $40,000 | $231 | 23.1% |
| $100,000 | $305 | 30.5% |
| $200,000 | $297 | 29.7% |
The last row is worth less than the one above it, and that is not a mistake: past the Social Security wage base the self-employment part of the saving drops from 15.3% to 2.9%, and the higher income-tax bracket does not quite make up the difference. A deduction is worth most in the middle.
Add a state income tax and every row rises. The 1099 calculator applies that layer.
Where this comes from
The rules on this page that are specific rather than general are cited below. Follow a link to read the provision itself rather than taking our word for it:
- Household employment: the 2026 cash wage threshold, the rates and Schedule HIRC 3121(a)(7)(B), (x); IRS Pub. 926
Related
- Full deductions checklist
- Every profession
- 1099 taxes by state
- Quarterly payments
- Is an S-corp worth it?
- Local income tax
General information about how these deductions work, not tax advice. Whether a particular expense is deductible for you depends on facts this page does not have, check with a tax professional before claiming anything listed here.