IRS Schedule H Form (1040) – Household Employment Taxes

IRS Schedule H Form – If you’re a household employer—such as someone who hires a nanny, housekeeper, gardener, or babysitter—you may be responsible for paying and reporting certain taxes on their wages. This is where IRS Schedule H (Form 1040), also known as Household Employment Taxes, comes into play. Often referred to as the “nanny tax,” Schedule H ensures compliance with federal tax laws for domestic workers. In this comprehensive guide, we’ll break down everything you need to know about Schedule H for the 2025 tax year, including who must file, how to calculate taxes, filing instructions, and more. Whether you’re filing for the first time or need a refresher, this article uses the latest IRS guidelines to help you navigate the process smoothly.

What is IRS Schedule H (Form 1040)?

Schedule H is a tax form attached to your individual income tax return, such as Form 1040 or 1040-SR, to report employment taxes for household employees. Household employees are workers who perform services in or around your home, like cleaning, cooking, childcare, or yard work, and whom you control in terms of what work is done and how it’s performed. This form covers Social Security taxes, Medicare taxes, Additional Medicare Tax (if applicable), withheld federal income taxes, and Federal Unemployment Tax Act (FUTA) taxes.

Unlike independent contractors (e.g., a self-employed landscaper with their own business), household employees are under your direction, and you provide their tools or supplies. If you misclassify a worker, you could face penalties, so it’s crucial to determine their status correctly using IRS criteria. The form helps you calculate and pay these taxes, ensuring your employees receive proper credit toward Social Security and Medicare benefits.

For the 2025 tax year (filed in 2026), Schedule H has been updated with new wage thresholds and rates, reflecting adjustments for inflation and legislative changes. You can download the form directly from the IRS at https://www.irs.gov/pub/irs-pdf/f1040sh.pdf and the instructions at https://www.irs.gov/pub/irs-pdf/i1040sh.pdf.

Who Needs to File Schedule H?

Not every household employer must file Schedule H. The IRS sets specific thresholds based on wages paid. For 2025, you generally need to file if:

  • You paid cash wages of $2,800 or more to any single household employee during the year. (Cash wages include payments by check or money order but exclude non-cash items like food or lodging unless provided as cash equivalents.)
  • You withheld federal income tax from any household employee’s wages (even if below the $2,800 threshold).
  • You paid total cash wages of $1,000 or more in any calendar quarter of 2024 or 2025 to all household employees combined (for FUTA taxes).

Exceptions apply: Wages paid to your spouse, child under age 21, parent (with certain qualifications), or anyone under age 18 don’t count toward these thresholds. However, if the employee is your parent providing childcare for your child under 18, and they qualify due to divorce, widowhood, or a spouse’s disability, those wages may still be taxable.

If none of these apply, you don’t need to file Schedule H. But if wages meet the criteria, you’ll also need to issue Form W-2 to the employee by February 2, 2026, and file Copy A with the Social Security Administration (SSA). Sole proprietors with business employees might report household taxes on Forms 940, 941, or 944 instead.

Household employers must obtain an Employer Identification Number (EIN) if they don’t have one—apply free at IRS.gov/EIN. Verify employee eligibility with Form I-9 and keep records for at least four years.

Key Thresholds and Changes for 2025

The IRS adjusts thresholds annually. For tax year 2025:

  • Social Security and Medicare Tax Threshold: $2,800 in cash wages to any one employee.
  • FUTA Tax Threshold: $1,000 in total cash wages per quarter to all employees.
  • Social Security Wage Base: $176,100 per employee (taxes apply only up to this limit).
  • Additional Medicare Tax: Applies to wages over $200,000 per employee (0.9% withheld from employee only).
  • Qualified Parking/Commuter Benefits Exclusion: $325 per month.
  • Overtime Compensation Deduction: Up to $12,500 ($25,000 for married filing jointly) for qualified overtime pay (post-2024 through 2028).

Notable changes: COVID-related credits have expired, and bicycle commuting reimbursements are no longer excluded. For FUTA, credit reduction applies in certain states (e.g., Virgin Islands at 4.5%). If you pay state unemployment contributions late, your FUTA credit is limited to 90%.

Tax Type Employee Share Employer Share Total Rate Wage Limit
Social Security 6.2% 6.2% 12.4% $176,100
Medicare 1.45% 1.45% 2.9% None
Additional Medicare 0.9% (withheld) None 0.9% Over $200,000
FUTA None 6.0% (net 0.6% after credit) 6.0% First $7,000 per employee

Types of Household Employment Taxes Covered

Schedule H calculates four main taxes:

  1. Social Security Tax: Funds retirement and disability benefits. Both you and the employee pay 6.2% on wages up to $176,100.
  2. Medicare Tax: Supports healthcare for seniors. Both parties pay 1.45% on all wages (no cap).
  3. Additional Medicare Tax: An extra 0.9% withheld from employee wages exceeding $200,000.
  4. FUTA Tax: Pays for unemployment benefits. Employer-only at 6.0% on the first $7,000 per employee, reduced by up to 5.4% for timely state contributions.

You can choose to pay the employee’s share of Social Security and Medicare from your own funds (instead of withholding), but report it as additional income on their W-2. Federal income tax withholding is optional and based on the employee’s Form W-4.

How to Calculate Household Employment Taxes?

Calculations are straightforward but require accurate wage records. Here’s a step-by-step overview:

  1. Determine Taxable Wages: Sum cash wages per employee, excluding exceptions. For Social Security, cap at $176,100; Medicare has no cap.
  2. Social Security Tax: Taxable wages × 12.4%.
  3. Medicare Tax: Taxable wages × 2.9%.
  4. Additional Medicare: (Wages over $200,000) × 0.9%.
  5. Federal Income Tax Withheld: As per employee’s W-4 (voluntary).
  6. FUTA Tax: (Wages up to $7,000 per employee) × 6.0%, minus state credit (up to 5.4%). Use worksheets for late payments or credit reductions.

Example: You paid a nanny $30,000 in cash wages in 2025. Social Security tax = $30,000 × 12.4% = $3,720. Medicare tax = $30,000 × 2.9% = $870. If FUTA applies (and you paid state contributions timely), FUTA = $7,000 × 0.6% = $42. Total taxes: $4,632 (plus any withheld income tax).

If state disability payments were made, include them as wages and subtract withheld amounts.

Step-by-Step Guide to Filling Out Schedule H

Schedule H has four parts. Start with the screening questions on page 1 to determine which sections to complete.

Part I: Social Security, Medicare, and Federal Income Taxes

  • Lines 1–4: Enter wages and calculate Social Security (12.4%) and Medicare (2.9%) taxes.
  • Lines 5–6: Additional Medicare if applicable.
  • Line 7: Withheld income tax.
  • Line 8: Total of above.
  • Line 9: Check for FUTA eligibility.

Part II: FUTA Tax

  • Lines 10–12: Answer questions to choose Section A (simple credit) or B (detailed).
  • Section A: State info, wages, tax at 0.6%.
  • Section B: Detailed state rates, worksheets for adjustments.

Part III: Total Taxes

  • Line 25: From Part I (or zero).
  • Line 26: Add FUTA.
  • Transfer to your tax return (e.g., Schedule 2, line 9).

Part IV: Signature (if standalone filing)

Sign under penalties of perjury.

Use the IRS instructions for detailed line-by-line guidance.

Common Mistakes to Avoid

  • Misclassifying Workers: Treat independent contractors differently—use Form 1099-NEC.
  • Ignoring Thresholds: Even if under $2,800, file if you withheld income tax.
  • Late Filings: W-2s due February 2, 2026; returns by April 15, 2026. Penalties apply for delays.
  • Forgetting State Taxes: Schedule H covers federal only—check your state for unemployment or other requirements.
  • Incorrect Withholding: Use updated Form W-4 for overtime deductions.
  • Record-Keeping Errors: Keep wage logs, Forms W-2, and payments for audits.

Tips: Use payroll software or a service like SurePayroll for automation. Electronic filing reduces errors.

Filing and Payment Instructions

Attach Schedule H to your Form 1040 (or equivalent) and file by April 15, 2026. If no return is required, file Schedule H standalone with payment. Pay electronically via IRS.gov/Payments to avoid penalties. Deposit taxes quarterly if over certain amounts (see Pub. 926). Extensions for Form 1040 extend Schedule H, but pay any owed taxes by the original due date.

For Puerto Rico residents, special rules apply—no federal income tax withholding references.

Additional Resources

Consult a tax professional for complex situations, like multiple employees or international workers.

Conclusion

Filing IRS Schedule H for household employment taxes doesn’t have to be overwhelming. By understanding the thresholds, calculations, and requirements for 2025, you can ensure compliance and avoid costly mistakes. Remember, these taxes benefit your employees’ future security while fulfilling your legal obligations as an employer. If you’re unsure, review the official IRS resources or seek expert advice to stay on top of your nanny tax responsibilities.