Illinois Household Employer Guide 2026
Your household employee — a nanny, caregiver, housekeeper, or anyone who works in your Illinois home — is a W-2 employee. Illinois adds a flat 4.95% state income tax, statewide paid leave, and unique domestic-worker protections — but with an unusually light state filing burden compared to most states. Chicago and Cook County stack additional rules on top. Here's everything you need for 2026.
Start Payroll Free →- State — flat 4.95% income tax, 40 hrs/yr paid leave under PLAWA, mandatory mileage reimbursement, and one of the country's strongest Domestic Workers' Bill of Rights (820 ILCS 182).
- Chicago — two distinct categories of paid leave (40 hrs sick + 40 hrs paid), $16.60 minimum wage that applies to any domestic worker regardless of employer size, and a written-contract requirement.
- Cook County (suburbs only) — Paid Leave Ordinance (40 hrs/yr, any reason). Municipal coverage varies — check the Commission on Human Rights list before assuming the county rule applies.
When the rules apply
Each tax threshold is a trigger. Once you cross one, the corresponding taxes apply to the wages that triggered the crossing — not just the amount above the threshold. Illinois household employers face federal triggers, IL state UI tax, and IL state income tax withholding.
How Nest Payroll handles this
Each pay period, you pay your employee the net amount directly — through Venmo, Cash App, Zelle, your banking app, or by check. We calculate accurate withholdings on every pay stub from day one, including the IL flat 4.95% personal income tax. Once you cross the $1,000 quarterly threshold, we register you with IDES.
Illinois household payroll splits cleanly into two flows: a federal flow that's the same in every state, and a state flow that's unusually light in Illinois.
Federal taxes — quarterly EFTPS payments
At the end of each federal quarter (March, May, August, December), Nest debits your bank account for the federal taxes owed — FUTA, employer + employee FICA, and any federal income tax withheld — and remits them to the IRS via EFTPS. You'll get a confirmation email a week beforehand. Your money stays in your account until taxes are actually due. We don't hold withholdings on your behalf. At year-end, Schedule H on your Form 1040 reconciles everything Nest already paid through the year; Nest produces a signature-ready version.
Illinois state taxes — annual filings
Illinois doesn't have households filing quarterly IL-941 or quarterly UI returns. Both settle at year-end:
- Illinois UI — Nest files the annual UI return with IDES on your behalf at year-end. We send quarterly heads-up emails so the bill isn't a surprise.
- Illinois state income tax withheld — paid by you on your personal IL-1040, Line 20 (a special line for household state income tax withheld). Nest tells you the exact amount in January.
Setup checklist (before they start)
The one-time tasks that need to be done before — or shortly after — your household employee's first day.
Workers' Compensation Insurance
If your household employee works 40+ hours per week for 13 or more weeks in a calendar year, Illinois requires you to carry workers' comp coverage. Below that threshold, it's not legally required — but most household employers still carry it, because the downside of skipping it is uncapped personal liability for a workplace injury (a back injury lifting a child, a slip in your kitchen, a car accident on a school run).
The legal authority is the Illinois Workers' Compensation Act (820 ILCS 305).
Two paths to coverage
Start with your homeowner's or renter's insurance carrier first — many policies can add a household-employee rider for a modest premium, which is the cleanest path. If your carrier can't cover it, a standalone household-employer policy from a private carrier is the fallback.
Form I-9 (Employment Eligibility)
Federal law requires all employers to verify employment eligibility using Form I-9. Complete this before your household employee's first day of work.
Federal W-4 and Illinois IL-W-4
Two withholding forms to collect at hire:
- Federal W-4 — determines federal income tax withholding.
- Illinois IL-W-4 — determines IL state income tax withholding (the $2,925 personal exemption per dependent for 2026 flows from this form).
Illinois New Hire Reporting
Illinois requires all employers — including household employers — to report newly hired and rehired employees to the Illinois Department of Employment Security (IDES) New Hire Directory within 20 days of the hire date.
You'll provide your employee's name, address, SSN, hire date, and your contact information. The report can be filed online through the IDES portal.
Required Employment Posters
Illinois employers must provide a number of state-mandated notices to their workers. For a household employer with a single employee, you can satisfy this by emailing or texting the link, or printing and giving them physical copies:
If you employ a worker in Chicago, additional Office of Labor Standards notices apply (Chicago minimum wage, paid leave + sick leave, domestic worker rights). The Cook County Commission on Human Rights also has poster requirements for the Paid Leave Ordinance in covered municipalities.
Written Work Agreement
Illinois state law doesn't require a written employment agreement for most employers, but a written contract prevents misunderstandings about hours, duties, PTO, and house rules — and it documents your compliance with the IL DWBR (820 ILCS 182).
Build a free contract with our editable template: Nest Payroll Household Employee Contract Builder — fill it out and download as a PDF.
Hand In Hand, a non-profit supporting domestic employers and employees, also offers free sample contracts and guidebooks.
Pay & compensation
Everything that goes into a paycheck — minimum wage, overtime, when to pay, pay stubs, and reimbursable mileage.
Minimum Wage — three layers
Illinois has a state minimum wage with city- and county-level premiums in the Chicago region. Whichever rate is highest at your employee's work location applies.
| Where work is performed | Hourly Rate | Source |
|---|---|---|
| Statewide (default) | $15.00 | 820 ILCS 105 (effective Jan 1, 2025) |
| Chicago — any domestic worker, any size employer | $16.60 | BACP, effective July 1, 2025 |
| Cook County (suburbs that haven't opted out) | $15.00 | Cook County Commission, effective July 1, 2025 |
Cook County and Chicago both adjust the rate annually each July 1 by CPI (capped at 2.5%). The next bump is expected July 1, 2026.
Overtime
Illinois follows the federal Fair Labor Standards Act (FLSA) standard for household worker overtime: 1.5× the regular hourly rate for all hours worked over 40 in a 7-day workweek. IL doesn't impose a stricter daily-overtime rule.
| Condition | Rate |
|---|---|
| Live-out, more than 40 hours in a workweek | 1.5× hourly |
| Live-in employees (any hours) | Exempt from overtime |
| Voluntary work on a day of rest (ODRISA) | 1.5× hourly |
| Work performed on a holiday or weekend (otherwise routine) | No premium required |
"No Tax on Overtime" Deduction (2025–2028)
Under the One Big Beautiful Bill Act (OBBBA), signed July 2025, your household employee may be able to deduct the premium portion of their overtime pay — the "half" in time-and-a-half — from their federal taxable income.
| Detail | Value |
|---|---|
| What's deductible | Only the premium (0.5×) portion of FLSA overtime |
| Max deduction (single) | $12,500/year |
| Max deduction (joint) | $25,000/year |
| Income phaseout | $150,000 MAGI ($300,000 joint) |
| Duration | Tax years 2025–2028 |
Pay Frequency
Household employees are usually treated as non-exempt hourly workers under FLSA rules — even when you've agreed to pay a "salary," it's treated as a wage covering a fixed number of hours per week, with overtime owed on hours past 40. Under the Illinois Wage Payment and Collection Act (820 ILCS 115/3), employees must be paid at least semi-monthly, with wages owed within 13 days of the end of the pay period. Daily, weekly, and bi-weekly are all allowed and common for household payroll. Monthly pay is not permitted for non-exempt employees.
Whatever cadence you pick, designate the regular paydays in writing at hire and stick to them — even a simple email or text confirming "you'll be paid every Friday" satisfies the requirement.
Mileage Reimbursement — required by Illinois law
If your household employee drives their own car for work — to school pickup, the grocery store, doctor's appointments — Illinois law requires you to reimburse them. Most employers pay the IRS standard rate, which bundles fuel, wear, and insurance into a single number.
$0.725 per mile (2026)
Reimbursable miles are anything driven in the scope of the job: children to activities, household errands, a senior client to medical appointments. Your employee's commute from home to your residence does not count. The legal basis is 820 ILCS 115/9.5, added to the Wage Payment and Collection Act in 2019. It doesn't set a specific rate; the IRS standard is the safe, conventional choice.
Paystub Requirements
Under 820 ILCS 115/10, each pay period you must provide your employee with an itemized statement showing hours worked, rate of pay, gross wages, deductions, and net wages. Records must be retained for at least 3 years. As of 2024 amendments, employees can request copies of their paystubs at any time, and you must provide them within 21 days.
This is a lot to track on your own.
Nest handles federal and Illinois payroll calculations, IL state withholding on every pay stub, the annual IDES UI return, W-2s, and a signature-ready Schedule H — starting at $42/mo. 14-day free trial.
Time off & leave
Illinois law sets a single statewide paid-leave floor (PLAWA), with stronger overlays in Chicago and parts of Cook County. There's no Illinois paid family leave or temporary disability program — IL workers rely on federal FMLA (which household employers with fewer than 50 workers are exempt from anyway) and on PLAWA's "use for any reason" framework.
Paid Leave for All Workers Act (PLAWA) — 40 hours/year
Every Illinois household employee earns up to 40 hours of paid leave per year, usable for any reason, no questions asked. Eligibility kicks in after 90 days of employment, and time builds up at 1 hour for every 40 hours worked — though as we'll show below, frontloading the full 40 hours upfront is the simpler path.
This comes from the Illinois Paid Leave for All Workers Act (820 ILCS 192), effective January 1, 2024. Domestic workers are explicitly covered.
PLAWA applies in lieu of any local paid leave ordinance; if Chicago or Cook County ordinances apply at your worker's location, the more generous local terms govern. If only PLAWA applies (the typical situation outside Chicago and Cook County), 40 hours/year is the floor.
Accrual vs. frontloading — and why frontloading is simpler
You have two ways to deliver PLAWA hours:
Frontloading is generally better for household employers for three reasons:
- No accrual tracking. You skip the per-hour-worked math (1 per 40 under PLAWA, 1 per 35 in Chicago) and the year-end true-up.
- No carryover obligation. Frontloaded time can reset at the start of each new year; accrued time must carry over (up to 80 hours for PLAWA sick leave, or under the Chicago caps).
- No separation payout for the statutory minimum. PLAWA does not require payout of unused leave at separation, and Chicago's payout rule applies only to employers with 51+ employees — households are exempt there too.
If you offer additional PTO on top of the statutory minimum, the extra hours are treated under the IL Wage Act — see Vacation & PTO below for how that affects payout.
- PLAWA only (most of IL outside Chicago / Cook County): 40 hours
- Chicago: track as two 40-hour balances — 40 hrs Paid Sick Leave + 40 hrs Paid Leave (each is a distinct legal category with its own use rules)
- Cook County (covered municipalities): 40 hours of paid leave (any reason)
Vacation & PTO
Illinois does not require paid vacation. The paid-leave floor that applies depends on where your worker performs services: 40 hours statewide under PLAWA, or 80 hours total for Chicago workers under the Chicago Paid Leave + Sick Leave Ordinance (which preempts the lower PLAWA minimum within Chicago). If you offer PTO as a separate benefit on top of that floor, the extra hours fall under the Illinois Wage Payment and Collection Act — accrued, unused vacation must be paid out as wages at separation, regardless of why employment ended. There's no "use it or lose it" exception once the time has been earned.
For separation flexibility, the cleanest approach is to frontload only the location-required minimum without offering additional vacation. PLAWA explicitly does not require payout of unused leave at separation under 820 ILCS 192/15(c); Chicago's payout requirement applies only to employers with 51+ employees, so households are exempt there too. If you offer extra PTO on top of the floor, document the policy in writing — including the maximum accrual cap — and be prepared to pay out unused hours at the worker's final rate.
- Keep PLAWA separate from vacation. Illinois treats accrued vacation as earned wages under the Wage Act — it must be paid out at separation. PLAWA explicitly does not require payout. If you combine them into a single "PTO" bank, the entire balance can be characterized as vacation, defeating the purpose of frontloading. Track them as separate buckets on the pay stub.
- Frontload the floor, not more. If you frontload exactly the statutory minimum (40 PLAWA hours, or 80 hours for Chicago), there's no payout obligation at separation. If you frontload extra — say, a generous 120-hour PTO — the excess above the floor is treated as vacation under the Wage Act and must be paid out. Generosity is fine; just structure it intentionally.
VESSA & Pregnancy Accommodation
Two Illinois leave laws apply to all employers, including households:
Victims' Economic Security and Safety Act (VESSA, 820 ILCS 180): An employee who is a victim of domestic, sexual, or gender violence — or whose family or household member is a victim — may take up to 4 workweeks of unpaid leave in a 12-month period (for employers with 1–14 employees, the typical household size). Larger employers must offer 8 or 12 weeks. Permitted uses include seeking medical attention, victim services, counseling, safety planning, legal action, and (per a 2024 amendment) attending a funeral or making arrangements after a family member is killed in a violent crime.
Illinois Human Rights Act / Pregnant Workers Fairness Act (775 ILCS 5): All employers in Illinois must provide reasonable accommodations for pregnancy, childbirth, and related conditions — including more frequent breaks, time off for prenatal care, and modified work assignments.
Domestic worker protections (state + Chicago + Cook County)
Illinois has some of the country's strongest statutory protections for domestic workers, layered through three state statutes plus city ordinances (Chicago, Cook County). If your employee is a nanny, caregiver, housekeeper, or other in-home worker, the protections in this section apply on top of everything covered above.
Illinois Domestic Workers' Bill of Rights (820 ILCS 182)
The IL DWBR is the reason most of the protections in this guide apply to your nanny or caregiver in the first place. Before 2017, domestic workers were carved out of Illinois's core employment statutes. The DWBR amended four of them to put household workers back in.
Practically, that means the rules already covered above apply to anyone working in your home for at least 8 hours per week:
- State minimum wage and overtime (820 ILCS 105)
- 24-hour weekly rest day and meal/rest breaks (820 ILCS 140)
- Itemized pay stubs, mileage reimbursement, and final-pay protections (820 ILCS 115)
- Anti-discrimination and anti-harassment protections regardless of employer size (775 ILCS 5)
The IL DWBR (effective January 1, 2017) was one of the first state-level domestic-worker bills of rights in the country and became a template for Massachusetts, Connecticut, Nevada, New Mexico, New York, Oregon, Virginia, and Washington.
One Day Rest in Seven Act (820 ILCS 140) — ODRISA
Your household employee is entitled to one full day off per week (24 consecutive hours) and short breaks on long shifts. If they voluntarily work on their day of rest, you owe time-and-a-half for those hours — even if the weekly total is under 40.
| Requirement | Detail |
|---|---|
| Weekly day of rest | 24 consecutive hours in every consecutive 7-day period |
| Meal break | 20 minutes after 7.5 hours of continuous work, no later than 5 hours after the start of the shift |
| Additional break for long shifts | Additional 20-minute break for every 4.5 hours beyond 7.5 hours (so a 12-hour shift = two 20-min breaks) |
| Voluntary work on day of rest | Employee must be paid 1.5× the regular rate for all hours worked that day |
The One Day Rest in Seven Act was significantly amended by Public Act 102-828 (effective January 1, 2023), and the IL DWBR amendment (820 ILCS 140/2) explicitly extended ODRISA to domestic workers, who were excluded under the original statute. Where possible, the day of rest should align with the employee's traditional day for religious worship.
If voluntary day-of-rest work becomes a regular pattern, document it in writing and pay the 1.5× premium each time. Each week without 24 consecutive rest hours can be cited as a separate violation, and per-violation penalties of $250–$500 add up over a year.
Chicago — Domestic Workers Ordinance (written contract required)
Effective January 1, 2022, the Chicago Domestic Workers Ordinance (Municipal Code §6-120-020) requires every Chicago employer of a domestic worker — nanny, caregiver, housekeeper, or other in-home worker — to provide a written contract.
What the contract must include
- The agreed wage rate
- The agreed work schedule (typical hours, days)
- Provided in the worker's primary language upon request
The ordinance covers anyone classified as either an employee or an independent contractor; for W-2 nanny / caregiver / housekeeper employment, it always applies. The penalty for failing to provide a written contract is $500 per violation, plus the worker may recover damages.
Chicago — Paid Leave + Sick Leave Ordinance (40 + 40 hours)
Effective July 1, 2024, the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance requires every Chicago employer — including households — to provide two separate categories of paid leave:
| Category | Annual Cap | Accrual | Carryover |
|---|---|---|---|
| Paid Sick Leave (specific reasons: illness, care, DV, public health) | 40 hours | 1 hour per 35 worked | Up to 80 hours |
| Paid Leave (any reason — vacation, personal) | 40 hours | 1 hour per 35 worked | Up to 16 hours |
Chicago domestic workers earn both categories — total of 80 hours/year. Use begins after 30 days of employment for sick leave and 90 days for paid leave. Employers can frontload the full annual amount of either category to skip the per-hour tracking and carryover for that category.
Chicago's ordinance technically requires payout of unused paid leave (the non-sick portion) at separation for employers with 51+ employees. Households are well below that threshold — so payout is not required, but offering it is good retention practice.
Cook County — Paid Leave Ordinance (suburbs only, municipal coverage varies)
Effective December 31, 2023 (with Cook County Commission on Human Rights enforcement beginning February 1, 2024), the Cook County Paid Leave Ordinance replaced the prior Earned Sick Leave Ordinance. The new ordinance requires 40 hours of paid leave per year — usable for any reason (not limited to sick reasons) — for employees working in suburban Cook County, accrued at 1 hour per 40 worked. Coverage applies after 80 hours of work in a 120-day period; carryover allowed up to 40 hours into the next benefit year, or frontload to skip the carryover requirement.
Municipal coverage varies. The prior Earned Sick Leave Ordinance had broad opt-outs across roughly 80% of Cook County's 130+ municipalities. Under the new Paid Leave Ordinance, some municipalities operate under the county-wide rule and others have set their own paid leave standards under home-rule authority. Check the Cook County Commission on Human Rights' current covered-municipalities list before assuming the county rule applies. Chicago is not covered by the Cook County ordinance — Chicago has its own (more generous) two-bucket Paid Leave + Sick Leave structure described above.
Upon departure
Final wages are due by the next regularly scheduled payday at the latest — earlier if you can manage it. This applies whether the employee was terminated or resigned. The rule comes from the IL Wage Payment and Collection Act (820 ILCS 115/5). If your employee asks in writing for the final check to be mailed, send it by mail.
Unused vacation/PTO must be paid out as wages at separation, regardless of why employment ended — that's the IL Wage Act treatment of accrued vacation. Unused PLAWA hours don't need to be paid out for PLAWA-only employers (most of Illinois). Chicago's payout rule applies only to employers with 51+ employees, so households are exempt there too.
Final W-2 goes out by the regular January 31 deadline — or earlier if your former employee asks for it.
Chicago note: The Chicago Domestic Workers Ordinance encourages — but doesn't strictly require — advance notice of termination, especially for live-in workers. Reasonable notice or pay in lieu of notice is good practice.
Year-end forms
The Illinois household-employer tax year closes in two waves: forms by January 31, and your two personal returns (federal 1040 with Schedule H, and IL-1040) by April 15. Most of the federal tax has already been paid quarterly by the time you file — Schedule H reconciles the year. The state-side filing burden is unusually light in Illinois.
Your responsibilities
- Hand the W-2 to your employee by January 31 — IL state income tax withheld appears in Box 17.
- Attach Schedule H to your Form 1040 by April 15 — this reconciles the federal taxes Nest paid quarterly throughout the year (FUTA, FICA, any FIT withheld). Nest produces a signature-ready version; you sign and file it with your 1040.
- Report household IL withholding on your IL-1040, Line 20, by April 15 — the special line for household state income tax withheld. Nest tells you the exact amount in January.
What Nest handles for you
- Quarterly federal tax payments to the IRS via EFTPS — FUTA, FICA, and any federal income tax withheld, debited from your bank account at the end of each federal quarter
- W-3 + Copy A of W-2 with the Social Security Administration
- Annual UI return with IDES, once you've crossed the $1,000 quarterly threshold (Illinois allows household employers to file UI annually rather than quarterly — a meaningful simplification compared to most states)
Tax breaks for household employers
Paying your household employee legally unlocks meaningful federal tax breaks that often offset most of your employer-side payroll tax cost.
Dependent Care FSA (DCFSA)
For 2026, the federal max contribution is $7,500 (married filing jointly) — up significantly from prior years under the OBBBA. Note: your employer's specific plan may still cap at $5,000.
Child & Dependent Care Tax Credit
Up to 50% of qualifying care expenses for 2026 — up from 35% in 2025. Capped at $3,000 of expenses for one qualifying child or $6,000 for two or more. At the 50% rate, a family with two or more dependents could receive a credit of up to $3,000.
→ See our complete guide to nanny tax breaks — includes DCFSA, Care Credit, EAP (Educational Assistance Program), and ICHRA (health reimbursement).
Resources & free tools
Ready to pay your Illinois household employee legally?
Nest handles EIN setup, IDES registration, payroll calculations, the annual IDES UI return, W-2s, and a signature-ready Schedule H — all automatically. 14-day free trial.
Disclaimer: The information on this page is general in nature. This is not tax, legal, benefits, financial, or HR advice. Rules and regulations change over time and vary by location. Workers' compensation, the Illinois DWBR (820 ILCS 182), the One Day Rest in Seven Act (820 ILCS 140), Chicago and Cook County ordinances, and local tax requirements can be complex — consult an attorney, financial advisor, or licensed insurance broker for your specific situation.