Hiring a family member to help around the house? The IRS gives you a break on some employment taxes—but which ones depend entirely on the relationship. Spouse, child, parent—each has its own set of rules.
This guide puts every family exemption in one place so you can see exactly what applies to your situation.
For a visual overview with calculator access, see our family member taxes landing page.
The Complete Exemption Matrix
Every family relationship and which taxes apply. Bookmark this—it's the reference you'll come back to.
| Relationship | Social Security | Medicare | FUTA | Income Tax |
|---|---|---|---|---|
| Spouse | Exempt | Exempt | Exempt | Applies |
| Your child under 21 | Exempt | Exempt | Exempt | Applies |
| Your child 21+ | Applies | Applies | Applies | Applies |
| Your parent (caring for your child under 18) | Applies | Applies | Exempt | Applies |
| Your parent (all other situations) | Applies | Applies | Applies | Applies |
| In-law | Applies | Applies | Applies | Applies |
| Sibling | Applies | Applies | Applies | Applies |
| Other relative | Applies | Applies | Applies | Applies |
SUTA (state unemployment) is not in the table because it varies by state. Some states follow the federal exemptions, some don't. Check your state's rules.
Now the details for each relationship.
Spouse as Household Employee
Exemptions: Social Security, Medicare, FUTA — all exempt.
This is the most favorable tax treatment of any family employment arrangement. You skip the entire 15.3% FICA burden plus FUTA.
When it makes sense. One spouse manages the household full-time while the other works outside the home. Paying them formalizes the arrangement and creates earned income for the stay-at-home spouse.
The trade-off. Because FICA is exempt, these wages don't count toward your spouse's Social Security earnings record. If building their individual Social Security credits matters, the exemption actually works against you. However, most married people qualify for spousal benefits (up to 50% of the higher earner's benefit) regardless.
What you still need to do:
- Issue a W-2 with $0 in the Social Security and Medicare boxes
- File Schedule H reporting the wages
- Withhold federal income tax if your spouse requests it on their W-4
Annual savings example on $26,000 in wages: $4,020 compared to a non-family employee.
For a deeper dive, read our full guide to paying your spouse as a household employee.
Child Under 21 as Household Employee
Exemptions: Social Security, Medicare, FUTA — all exempt.
Same treatment as a spouse. Your child under 21 performing domestic work in your home is exempt from all three employment taxes.
Common scenarios:
- Your 17-year-old handles household chores during summer
- Your college-age child (under 21) babysits younger siblings
- Your teenager does yard work, cleaning, or organizing
Important details:
This exemption applies only to your own child (biological, adopted, or stepchild). Nieces, nephews, and other young relatives don't qualify.
The exemption ends the year your child turns 21. If your child turns 21 in June, the exemption covers the whole year up to their birthday, then standard rates apply for the remainder. In practice, most families switch to full taxation starting January 1 of the year they turn 21 to keep things simple.
The income tax angle. Your child's wages are still subject to income tax. But if household work is their only income and it's below the standard deduction ($16,100 for 2026), they likely owe zero federal income tax. They'd fill out a W-4 accordingly.
What you still need to do:
- Issue a W-2 (FICA boxes at $0)
- File Schedule H
- Report their wages
Practical tip: Paying your child for household work teaches financial responsibility and creates documentation if they need to show income for any purpose—scholarship applications, opening a bank account, building a credit history.
Child 21 and Older
Exemptions: None. Standard employment rules apply.
Once your child turns 21, the family exemptions disappear entirely. They're treated exactly like any other household employee:
| Tax | Rate | Status |
|---|---|---|
| Social Security | 6.2% each | Applies |
| Medicare | 1.45% each | Applies |
| FUTA | 0.6% on first $7,000 | Applies |
| Income tax | Per W-4 | Applies |
Common scenario: Your adult child (21+) cares for an aging grandparent in the grandparent's home, and you're paying them. All taxes apply at normal rates.
There's no phase-out or reduced rate. The day your child turns 21 (or, more practically, the next calendar year), the switch is clean.
Parent as Household Employee
Exemptions: FUTA only—and only when caring for your child under 18 (or a child with a disability requiring care).
This is the conditional exemption that trips people up. Your parent is partially exempt, but only in a very specific situation.
The FUTA Condition
Your parent is exempt from FUTA if and only if they're employed to care for your child who is:
- Under 18 years old, or
- Has a physical or mental condition requiring personal care for at least 4 continuous weeks in a quarter
If your parent is doing other household work—cleaning, cooking, general home management—and not specifically caring for your child, the FUTA exemption doesn't apply.
What About Social Security and Medicare?
They apply. Both of you pay the standard rates:
- 6.2% Social Security (you and your parent each)
- 1.45% Medicare (you and your parent each)
The silver lining: your parent builds Social Security credits on every dollar. If they have gaps in their earnings history, this directly increases their retirement benefit.
Example: Mom watches the grandkids
You pay your mom $250/week ($13,000/year) to watch your 5-year-old and 8-year-old.
| Tax | Your Cost | Mom's Cost |
|---|---|---|
| Social Security (6.2%) | $806 | $806 |
| Medicare (1.45%) | $189 | $189 |
| FUTA | $0 (exempt) | — |
| Total employment tax | $995 | $995 |
And you can claim the Child and Dependent Care Credit—up to $1,200 back for two children. So your net cost is roughly negative. You actually come out ahead.
For the full breakdown with real numbers, see our guide to paying your mom to babysit.
In-Laws
Exemptions: None.
Your mother-in-law, father-in-law, and any in-law relatives are treated as standard employees. The IRS family exemptions specifically reference your child, your spouse, and your parent—not your spouse's relatives.
| Relationship | Social Security | Medicare | FUTA | Income Tax |
|---|---|---|---|---|
| Mother-in-law | Applies | Applies | Applies | Applies |
| Father-in-law | Applies | Applies | Applies | Applies |
| Brother/sister-in-law | Applies | Applies | Applies | Applies |
This surprises a lot of families. If your mother-in-law watches the kids, she's taxed the same as any non-family babysitter—including full FICA and FUTA.
Workaround: If your spouse is the one who technically "employs" their own mother, the parent exemption (FUTA exempt) may apply because the relationship is parent-to-child. Which spouse is the employer depends on whose name is on the EIN and Schedule H. Consult a tax advisor if this distinction matters for your situation.
Siblings
Exemptions: None.
Your brother or sister working in your home as a household employee gets no special tax treatment. All standard employment taxes apply.
This includes:
- Full siblings
- Half-siblings
- Stepsiblings
Some families assume "family = exemptions," but the IRS limits exemptions to three relationships: spouse, child (under 21), and parent (conditional).
SUTA: The State Wildcard
The matrix above covers federal taxes. State unemployment insurance (SUTA) is its own animal.
Some states mirror the federal exemptions. If FUTA is exempt, SUTA is also exempt.
Other states have their own rules entirely. They may exempt spouses and children but not parents, or vice versa, or have no family exemptions at all.
States with notable quirks:
- California and New York have disability insurance and paid family leave programs that may or may not follow family exemptions
- New Jersey has its own rules for family employee exemptions
There's no shortcut here—you need to check your specific state's requirements.
The $3,000 Threshold Still Applies
Family exemptions change which taxes you owe—they don't change whether you owe taxes at all. The household employment threshold is still $3,000 for 2026 (per employee, per calendar year).
If you pay a family member less than $3,000 in a year, no employment taxes are required regardless of the relationship.
If you pay $3,000 or more, the exemptions in this guide determine which taxes apply.
Use our nanny tax calculator to see the exact numbers for your situation.
Paperwork Requirements for All Family Employees
Regardless of exemptions, every family employee still needs:
Before they start working:
- W-4 for income tax withholding preferences
- I-9 for employment eligibility (technically required, though enforcement is rare for family)
During the year:
- Pay records — date, hours, gross pay, withholdings
- Quarterly tax payments — either through your W-4 or Form 1040-ES
Year-end:
- W-2 by January 31 — even if some boxes are $0 due to exemptions
- Schedule H with your tax return — reporting wages and whatever taxes do apply
To get started:
- EIN — your employer tax ID (free, 5 minutes)
- State registration — for unemployment insurance in your state
How NannyKeeper Handles Family Exemptions
When you add an employee in NannyKeeper, you identify the relationship—spouse, child, parent, or non-family. We take it from there:
- Automatic exemption application — the right taxes are calculated (or skipped) on every paycheck
- Correct W-2 generation — exempt boxes show $0, taxable boxes show the real numbers
- Schedule H preparation — reflecting the actual taxes owed, exemptions already factored in
- State-specific handling — we know which states follow federal exemptions and which don't
You don't need to memorize this matrix. Just tell us who they are, and we handle the rest.
FAQ
Do family exemptions apply if the family member works in someone else's home?
The exemptions apply when a family member works in your home. If you pay your parent to care for your child in the parent's own home, the IRS still treats this as your household employment—the exemptions still apply because what matters is the employer-employee relationship, not the location.
Can I choose NOT to use the exemptions?
Technically, you shouldn't pay FICA on exempt wages—the IRS doesn't want you overpaying. But the practical concern here is usually about a parent wanting Social Security credits from spousal or child-under-21 wages. Those wages are exempt from FICA by law, and the Social Security Administration won't credit them even if you mistakenly pay FICA tax on them.
What if our relationship changes—say, my stepchild turns 21?
The exemption for children ends the year they turn 21. For practical purposes, switch to standard employment tax calculations starting January 1 of the year after they turn 21. If a marriage ends and a stepchild relationship changes, consult a tax advisor about the transition.
Do I need a separate EIN for each family employee?
No. One EIN covers all your household employees—family and non-family. You file one Schedule H covering everyone, with individual W-2s for each person.
What if I employ both a family member and a non-family nanny?
Each employee gets the tax treatment that matches their relationship to you. Your spouse's paycheck has no FICA; your nanny's paycheck has full FICA. NannyKeeper handles multiple employees with different tax treatments on the same account. Schedule H combines the totals.
See what you'll owe
Use our free calculator to estimate your nanny tax costs for 2026.