Maryland Household Employer Guide 2026
Your household employee — a nanny, caregiver, housekeeper, gardener, or anyone who works in your MD home — is a W-2 employee. Maryland has statewide minimum wage and sick-leave rules, required workers' comp once the household threshold applies, and FAMLI contributions beginning in 2027.
Start Payroll Free →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.
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. Once you cross the $1,000 quarterly threshold, we register you with the MD Comptroller and MD Department of Labor.
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.
Maryland state taxes — quarterly UI filings
Each quarter, Nest files the Unemployment Insurance return with the MD Department of Labor for state UI — an employer-paid contribution, not withheld from your employee. Starting January 2027, FAMLI contributions are added to the same quarterly cycle (see Section 4 below).
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
Workers' compensation insurance is required of every Maryland employer once you pay $1,000 or more in wages in a calendar quarter. This is an insurance requirement, not a tax — it covers on-the-job injuries and protects you from liability.
Where to get coverage
You may already be covered through your homeowner's or renter's insurance — call your insurance company first to check. Otherwise, three options:
- Private insurance carrier — frequently obtained as a rider on your homeowner's or renter's policy.
- Injured Workers Insurance Fund (IWIF) — Maryland's state insurance fund, available to any MD employer:
8722 Loch Raven Boulevard, Towson, MD 21204-6285
(410) 494-2000 or 1-800-492-0197 - Self-insurance — only viable for very large employers; not realistic for households.
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
The federal W-4 determines how much federal income tax to withhold from each paycheck. Have your household employee fill this out at hire and any time their situation changes.
Notice of Wages & Pay Period
Maryland requires employers to provide each employee with notice of their pay rate, designated payday, and any deductions at the time of hire. You must give an employee at least one pay period of advance notice of any change to a payday or wage.
Pay Transparency in Job Postings
As of October 1, 2024, Maryland's Wage Range Transparency Law requires employers to include the pay range, a general description of benefits, and any other compensation details in any public job posting for a position physically performed (at least in part) in Maryland.
Even if you don't post publicly — for example, if you post only to a nanny agency or a private network — you must still disclose this same information before discussing compensation with a candidate, or upon their request.
Written Work Agreement
Maryland state law doesn't require a written employment agreement, but a written contract prevents misunderstandings about hours, duties, PTO, and house rules.
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.
Background Checks
Maryland doesn't require background checks for private household employees, but most families choose to run one for child care or elder care positions.
Common nanny/caregiver background check services: eNannySource, NannyVerify.
Pay & compensation
Everything that goes into a paycheck — minimum wage, overtime, when to pay, pay stubs, and reimbursable mileage.
Minimum Wage — $15.00/hr (2026)
Maryland's statewide minimum wage is $15.00/hour for all employers, regardless of size. Three counties have higher local minimums — when state and local minimums differ, employers must pay the higher rate.
| Location | Rate (Household Employer) |
|---|---|
| Montgomery County (small employer, ≤10 workers) | $15.95/hr |
| Howard County (small employer, ≤14 workers) | $15.50/hr* |
| Prince George's County | $15.30/hr |
| Rest of Maryland | $15.00/hr |
*Howard County small employer rate increases to $16.00/hr on July 1, 2026. Montgomery County rates adjust annually each July 1 based on CPI.
Overtime
Maryland household employees must be paid 1.5× their regular hourly rate for all hours worked over 40 in a 7-day workweek. This applies to live-in employees too.
| Condition | Rate |
|---|---|
| More than 40 hours in a workweek | 1.5× hourly |
| Live-in employees (over 40 hours) | 1.5× hourly |
"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 virtually always hourly under federal FLSA — 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. Maryland allows household employers to pay daily, weekly, bi-weekly, or semi-monthly. Monthly pay is not permitted for household workers. You must give an employee at least one pay period of advance notice before changing their payday or wage rate.
Mileage Reimbursement
Maryland law doesn't mandate mileage reimbursement, but you must reimburse necessary work-related driving expenses if those costs would otherwise reduce your employee's wages below the minimum wage. Most employers use the IRS standard rate:
$0.725 per mile (2026)
Common examples: driving children to activities, running household errands, taking a client to medical appointments. (Commuting to/from work doesn't count.)
Paystub Requirements
For each pay period, Maryland requires you to provide your employee with a statement of gross earnings and deductions. The statement must clearly show: gross wages, total hours worked, all deductions itemized, and net pay.
This is a lot to track on your own.
Nest Payroll handles payroll, tax filings, W-2s, and compliance — starting at $42/mo. 14-day free trial.
Time off & leave
Sick leave, vacation, and Maryland's upcoming Family and Medical Leave Insurance program.
Paid Sick Leave (Healthy Working Families Act)
Under the Maryland Healthy Working Families Act, household employers with 15 or more employees must provide paid sick leave; employers with fewer than 15 must provide unpaid sick and safe leave. Employees accrue 1 hour of leave for every 30 hours worked, up to 40 hours per year.
For most household employers (1–4 employees), this means up to 40 hours of unpaid sick and safe leave per year. Records must be maintained.
Accrual vs. frontloading — and why frontloading is simpler
Maryland gives you two ways to provide sick leave:
Frontloading is generally better for household employers for three reasons:
- No accrual tracking. You don't need to monitor the 1-per-30 rate or true-up at year end.
- No payout at separation. Frontloaded statutory sick leave doesn't have to be paid out when the employee leaves — that's true universally, in every U.S. state, including under the Maryland Healthy Working Families Act and the Montgomery County earned sick & safe leave rules.
- Annual reset. Frontloaded sick leave can reset to the full annual amount each year, whereas accrued sick leave generally carries over and complicates the tracking.
Vacation & PTO
Vacation is not required by Maryland law, but if you offer it: under MD law, accrued and unused vacation must be paid out at separation unless you have a written policy stating otherwise. To preserve flexibility, document your vacation policy in writing.
This is the policy-default rule with payout presumption: silent policy = pay out. Maryland's Wage Payment and Collection Law (Md. Code Ann. Lab. & Empl. § 3-505) treats accrued vacation as wages owed at separation unless the employer has a clear, written, bona fide policy specifically excluding payout. Forfeiture is allowed — but it must be documented in writing at hire to be enforceable.
For the portion that does have to be paid out, the calculation is the earned-but-unused portion through the last day worked, at the final rate of pay. Vacation accrues pro-rata as labor is performed — not in a lump sum at year start, even if you frontloaded it.
- Keep sick separate from vacation. If you combine sick and vacation into a single "PTO" bank, the entire balance gets characterized as vacation under MD's wage-payment law — converting the no-payout sick portion into payable wages at separation. Track sick and vacation as separate buckets on the pay stub.
- Document forfeiture explicitly if that's your intent. Maryland's default is payout. If you want unused vacation to forfeit at separation or year-end, you need a written policy that says so, communicated to the employee at hire. Silence creates a payout obligation.
- Vacation pays pro-rata, not the full balance. If you frontloaded 80 hours on January 1 and your employee leaves June 30 having used 16 hours, you owe 24 earned-but-unused hours (40 earned at half-year × pro-rata, minus 16 used) — not the full 64 unused hours.
See our Frontload PTO Payout guide for the full pro-rata framework, worked example, and tax treatment.
Maryland FAMLI (Paid Family & Medical Leave Insurance)
Maryland is launching a paid family and medical leave program called FAMLI. Coverage applies to nearly all employers, including household employers and their workers.
| Detail | Value |
|---|---|
| Contributions begin | January 1, 2027 |
| First quarterly report due | April 2027 |
| Benefits begin | January 1, 2028 |
| Total rate (small employers, <15 workers) | 0.45% of covered wages |
| Employee share (small employer) | Up to 0.45% (employer may withhold full amount) |
| Employer share (small employer) | $0 — exempt |
| Wage cap | Social Security wage base ($184,500 for 2026) |
What FAMLI provides (starting 2028): Up to 12 weeks of partial wage replacement for: serious health conditions, bonding with a new child, caring for a family member, or military deployment events. Benefits go up to 90% of the worker's average weekly wage, capped at $1,000/week. Lower-income workers receive a higher percentage replacement than higher earners. An employee may be eligible for an additional 12 weeks (24 weeks total) if they experience a serious health condition AND welcome a new child in the same benefit year. Employees need 680+ hours of work in the prior 12 months to qualify.
- Watch for FAMLI registration to open in Fall 2026 — all MD employers must register
- Decide whether to use the State Plan (default) or a private plan
- Notify your employee about FAMLI rights at hire (template forthcoming from MD Labor)
Montgomery County Domestic Workers Law
If your household employee works at least 20 hours per week for 30+ days in Montgomery County, the county's Domestic Workers Law requires you to:
- Present a written employment contract to your worker
- Offer to negotiate the terms with them
- If the worker chooses not to sign, both parties must sign a disclosure statement instead
The contract must include all of the following terms:
- Work schedule (days and hours)
- Duties expected of the worker
- Whether the employer can require additional duties beyond those listed
- Wages — hourly rate or salary
- How often the worker will be paid
- Any deductions from pay
- Overtime pay rate and conditions
- Sick leave
- Vacation time
- Holidays
- Living accommodations to be provided (for live-in employees)
- Deductions for food and lodging, if any
- Severance pay, if any
- Notice required before termination of the contract
- Length of the contract (or note that it's at-will)
- Reimbursement for work-related expenses
- Notice of employment rights under Maryland law
Live-in workers must also be provided with a separate room with a lock and reasonable access to a bathroom, kitchen, and laundry room.
Who's NOT covered
- Registered nurses, LPNs, or certified nursing assistants licensed by the MD Board of Nursing
- Family members (children, parents, spouses, immediate family of the employer)
- Au pairs operating under the State Department program
- Independent companions to the elderly or disabled (not employed through an agency)
Enforcement is by the Montgomery County Office of Consumer Protection: 240-777-0311.
Upon departure
Final wages: When a household employee is terminated or resigns, all wages owed must be paid by the next regular payday.
Earned-but-unused vacation: Maryland requires payout of accrued, unused vacation at separation unless your written policy says otherwise (Md. Code Ann. Lab. & Empl. § 3-505). If payout applies, calculate the earned-but-unused portion pro-rata through the last day worked at the final rate of pay. Frontloaded statutory sick leave doesn't have to be paid out (universally true, every state). See Vacation & PTO above and our Frontload PTO Payout guide for details.
Final W-2: Provide a federal Form W-2 by the regular January 31 deadline (or earlier if requested by the former employee).
Year-end forms
Your responsibilities
- Hand the W-2 to your household employee by January 31 — Nest produces this; you deliver it
- Attach Schedule H to your Form 1040 by April 15 — Schedule H reconciles the federal taxes Nest already paid quarterly through EFTPS; Nest produces a signature-ready version
What Nest handles for you
- Quarterly federal tax payments to the IRS via EFTPS (FUTA, employer + employee FICA, federal income tax withheld)
- W-3 + Copy A of W-2 filed with the Social Security Administration
- Quarterly UI filings with the MD Department of Labor (employer-only contribution)
- Starting January 2027: Quarterly FAMLI contribution reporting added to MD filings
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 MD household employee legally?
Nest Payroll handles EIN setup, MD state registration, payroll calculations, and quarterly tax filings — 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, FAMLI, and county-specific requirements can be complex — consult an attorney, financial advisor, or licensed insurance broker for your specific situation.