Families who hire a caregiver for a parent, a spouse or a disabled child usually start with the care, not the paperwork. The paperwork still matters: a caregiver paid in cash with no records loses Social Security credits and unemployment cover, and the family can end up owing back taxes and penalties. Doing it on the books is less work than it sounds, especially with one employee.
This post is for the United States and follows IRS Publication 926 (Household Employer's Tax Guide, 2026) and the Department of Labor's rules for direct care workers. State rules add to these, so check your state's labor and revenue departments as well.
First question: whose employee is the caregiver?
Publication 926 lists caretakers, health aides and private nurses among household workers. Whether a caregiver is your employee depends on control. If you control not only what work is done but how it is done, the caregiver is your household employee, even if you found them through an agency or a website. If an agency provides the worker and controls what work is done and how, the worker isn't your employee and the agency handles payroll. If the caregiver runs their own business and alone controls how the work is done, they are self-employed.
| Arrangement | Who is the employer | Who runs payroll |
|---|---|---|
| Home care agency sends and directs the caregiver | The agency | The agency; you pay its invoice |
| You hire and direct the caregiver yourself | You (household employer) | You, or a payroll service you hire |
| Self-employed caregiver with their own business, clients and methods | Nobody: they are self-employed | Nobody; they invoice you |
Some state Medicaid and veterans programs pay family caregivers through a fiscal agent that handles payroll. If a program like that pays your caregiver, ask it who files the employer taxes before doing anything yourself.
The 2026 federal thresholds
| Tax | When it applies | Rate |
|---|---|---|
| Social Security and Medicare | $3,000 or more in cash wages to one employee in 2026 | 15.3% in total: 7.65% withheld from the caregiver, 7.65% paid by you |
| Social Security wage base | Wages up to $184,500 | 6.2% each side stops above it; Medicare doesn't |
| Federal unemployment (FUTA) | $1,000 or more in total cash wages in any calendar quarter of 2025 or 2026 | 6% of the first $7,000, usually 0.6% after the state credit |
| Federal income tax | Only if the caregiver asks and you agree | From their Form W-4 |
Two family exceptions catch people out. Wages you pay to your spouse, or to your child under 21, don't count for Social Security and Medicare. But an adult child of 21 or over who is paid to care for a parent is counted like anyone else: the parent who pays is the employer. Wages paid to your own parent are generally not counted, with narrow exceptions for a parent caring for your young or disabled child.
Pay rules: minimum wage and overtime
The Department of Labor says direct care workers are generally entitled to minimum wage and overtime under the Fair Labor Standards Act. The federal minimum wage is $7.25 an hour, and most states set a higher one; you pay whichever is higher.
There are two exemptions an individual or family employer may claim and an agency may not: the companionship services exemption (from both minimum wage and overtime) and the live-in domestic service exemption (from overtime only). The companionship exemption is narrow and is meant for fellowship and protection rather than hands-on care, so many caregivers who help with bathing, dressing, meals and medication fall outside it. If you plan to rely on either exemption, read the DOL's domestic service fact sheets first, and check your state, which may not allow it.
Paying a caregiver on the books, step by step
- Get an employer identification number (EIN) from the IRS. You need it for Schedule H and the W-2; your own SSN is not used as the employer number.
- Register with your state for unemployment insurance and, if your state has an income tax, for withholding. Report the new hire to your state's new hire registry.
- Have the caregiver complete Form I-9 to confirm they can work in the US, and Form W-4 if you have agreed to withhold income tax.
- Agree an hourly rate and track hours. With hourly records you can show minimum wage and overtime were paid correctly.
- Each payday, work out gross pay, withhold the caregiver's 7.65% Social Security and Medicare (once you expect to reach $3,000 in the year) and any agreed income tax, and pay the net amount.
- Give the caregiver a pay stub showing hours, rate, gross pay, each deduction and net pay. Many states require a written wage statement each payday.
- Pay the federal taxes with your own return: Schedule H with Form 1040 by April 15, 2027 for 2026. Increase your own withholding or make estimated payments during the year so you aren't short.
- Give the caregiver Form W-2 by February 1, 2027, and file it with the Social Security Administration.
What it costs a family
Take a caregiver paid $20 an hour for 25 hours a week: $500 a week, or $26,000 a year. Your federal employer share is 7.65% of wages ($1,989) plus FUTA of 0.6% on the first $7,000 ($42), assuming you get the full state credit. State unemployment tax comes on top and varies by state. The caregiver's own 7.65% ($1,989) is withheld from their pay, not an extra cost to you. Our paycheck calculator shows the employee side for your state, and the employer lines are easy to add from the table above.
The other cost is time or a service. A household payroll service files everything for a monthly fee. Doing it yourself takes a little time each payday plus the year-end forms. With one caregiver and a steady schedule, many families manage it themselves.
Where PayDocs fits
PayDocs makes the documents a household employer hands over: a pay stub each payday, from your figures, and the caregiver's Form W-2 copies at year end. PayDocs works out federal income tax, Social Security, Medicare and supported state taxes for 2026 pay dates (see what we calculate); you can edit every line. You preview free and pay per document.
PayDocs doesn't run payroll, pay taxes or file Schedule H, state returns or W-2s with the SSA. It doesn't decide whether a caregiver is your employee or whether an exemption applies.
Questions
Do I have to pay taxes for a caregiver I hire privately?
If the caregiver is your household employee and you pay them $3,000 or more in cash wages in 2026, you owe Social Security and Medicare on those wages and report them on Schedule H. FUTA applies once you pay $1,000 or more in a calendar quarter.
Is a caregiver from an agency my employee?
Not if the agency provides the worker and controls what work is done and how. Then the agency is the employer and handles payroll; you pay its invoice.
Can I pay my adult son or daughter to care for me?
Yes, and the wages count for Social Security and Medicare if your child is 21 or older. You are the employer, with the same steps as for any other household employee.
Do caregivers get overtime?
Generally yes, under the Fair Labor Standards Act. Families may claim the companionship services or live-in exemptions in some cases; agencies may not. State law can be stricter.
Sources
- IRS: Publication 926, Household Employer's Tax Guide (2026)
- US Department of Labor: Direct care workers and the FLSA
- US Department of Labor: Minimum wage
Sources checked October 4, 2026. This article explains how pay documents work; it is not tax or legal advice.
