Paying a Private Caregiver Legally (2026 Thresholds)

Updated 2026-10

Agency or private hire

Families find home care in two ways. Through an agency, the agency recruits, schedules and employs the caregiver, and handles their payroll; the family pays the agency’s invoice. Through a private hire, found by word of mouth or a registry, the family usually pays less per hour and the caregiver usually takes home more, but the family is the employer. A registry that only introduces caregivers is not an agency in this sense, and the family is still the employer.

Employee or contractor

The IRS test turns on control. If the family decides when the caregiver works, what they do and how they do it, the caregiver is a household employee. That describes nearly every private caregiver in a parent’s home. Paying them as an independent contractor does not change their status, and the 1099-NEC is for payments made in a trade or business, which caring for your parent is not. A caregiver who runs their own business, with their own clients, tools and schedule, may be the exception; it is narrow.

The federal thresholds for 2026

• Social Security and Medicare: apply once one household employee is paid $3,000 or more in cash wages in 2026. The employer and employee each pay 7.65%.
• Federal unemployment (FUTA): applies once the household pays $1,000 or more in total cash wages in any calendar quarter of this year or last.
• Federal income tax: withholding is not required for a household employee, but can be done if the employee asks and the employer agrees.
• Forms: the employer gets an employer identification number, gives the caregiver a W-2 by January 31, files a W-3 with the Social Security Administration, and reports household employment taxes on Schedule H with their own Form 1040.

The Social Security threshold changes most years; it was $2,800 for 2025. Check the current figure in IRS Publication 926 before relying on it.

Family members

Some family employees are exempt from Social Security and Medicare tax: wages paid to your spouse, to your child under 21, and in limited cases to your parent. Paying a sibling, a niece or an adult child to care for a parent is generally not exempt. Which family member is the employer matters here, because the exemption depends on the relationship between employer and employee. These are questions to take to the tax preparer with the details in front of them.

State rules

Each state runs its own unemployment insurance and new-hire reporting, and states with an income tax may have their own withholding rules. Most states follow the federal $1,000-a-quarter test for unemployment registration; some do not, and California’s threshold for household employers is $750 in a quarter. Some states require workers’ compensation insurance for household employees above certain hours, New York and California among them.

Several states, including New York, California and Illinois, have domestic workers’ laws covering overtime, days of rest or paid leave. Federal minimum wage and overtime rules also apply to most caregivers; the exemptions for live-in workers and for companionship services are narrower than many families assume, and the federal rules on them have been under review. Check with the state labor department or an employment attorney before setting pay and hours.

Who should be the employer

The employer is whoever controls the work, and the taxes go on that person’s return. If your parent hires and pays the caregiver from their own funds, with you acting under a power of attorney, your parent is usually the employer. If you hire and pay the caregiver yourself, it may be you. The choice affects whose tax ID is used, whose return carries Schedule H, and whether the caregiver’s wages can count toward your parent’s medical expense deduction. Settle it with the tax preparer at the start.

If payroll was never run

Many families discover the rules after months or years of paying cash. The fix is to add up the wages paid, register with the IRS and the state, and file the missed returns. The tax preparer advises on amended returns and penalties. Catching up voluntarily is usually much better than being found out, which often happens when a caregiver files for unemployment or Social Security credit.

Where to go next

• Caregiver payroll service
• When siblings share a parent’s finances
• What daily money management costs