Texas Household Employer Guide 2026
Your household employee — a nanny, caregiver, housekeeper, gardener, or anyone who works in your TX home — is a W-2 employee. Texas is one of the simpler states for household payroll: no state income tax, optional workers' comp, no state paid leave program, and a straightforward TWC unemployment filing requirement.
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. Texas household employers face mostly federal triggers, plus state SUTA.
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 Texas Workforce Commission.
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.
Texas state taxes — quarterly TWC filings
Texas has no state income tax, so there's no state withholding to manage. The only state-level filing is quarterly SUTA with the Texas Workforce Commission via Form C-3. Nest calculates the employer-only SUTA contribution, files with TWC each quarter, and debits your account for the amount due. You don't manage state income tax accounts, withholding tables, or PIT registrations — there are none in Texas.
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 (Optional in Texas)
Texas is one of the few states that does NOT require employers to carry workers' compensation insurance. As a household employer, coverage is entirely optional — Texas calls employers without it "non-subscribers."
That said, we strongly recommend obtaining coverage. Workers' comp protects you from liability if your employee gets injured or sick on the job. Without it, you could be personally liable for medical expenses, lost wages, and potential lawsuits arising from a workplace injury — even one as simple as a slip in your kitchen.
Two paths to coverage
- Homeowner's or renter's insurance rider — call your insurance company first. Many policies include or can add household-employee coverage as a low-cost rider.
- Standalone household employer policy — available from private carriers if your homeowner's policy can't cover it.
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.
Texas New Hire Reporting
Texas requires all employers — including household employers — to report newly hired and rehired employees to the Texas Employer New Hire Reporting Operations Center within 20 days of the hire date.
Reporting can be done online, by mail, or by fax. You'll provide your employee's name, address, SSN, hire date, and your contact information.
Required Employment Posters
Texas requires employers to provide certain notices to their employees. 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:
For additional optional posters, see the TWC Workplace Posters page.
Written Work Agreement
Texas doesn't require a written employment agreement for household workers, 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.
Pay & compensation
Everything that goes into a paycheck — minimum wage, overtime, when to pay, pay stubs, and reimbursable mileage.
Minimum Wage — $7.25/hr (2026)
Texas adopts the federal minimum wage of $7.25/hour. Texas does not have a higher state minimum, and as of 2021, Texas state law preempts cities and counties from setting local minimum wages above the state rate. The same federal rate applies in Houston, Dallas, Austin, San Antonio, and everywhere else in the state.
Overtime
Texas doesn't have its own overtime rules — federal Fair Labor Standards Act (FLSA) applies. Household employees must be paid 1.5× their regular hourly rate for all hours worked over 40 in a 7-day workweek.
| Condition | Rate |
|---|---|
| Live-out, more than 40 hours in a workweek | 1.5× hourly |
| Live-in employees (any hours) | Exempt from overtime |
"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. Under the Texas Payday Law (Texas Labor Code §61.011), non-exempt employees — which includes virtually all household workers — must be paid at least twice per month. Texas does not allow monthly pay cycles for non-exempt workers. Employers must designate regular paydays and notify employees in writing.
- Most common schedules for household payroll: weekly (every Friday), bi-weekly (every other Friday), or semi-monthly (1st and 15th).
- Pay periods must be roughly equal in length.
- If you don't designate paydays in writing, Texas defaults your paydays to the 1st and 15th of each month.
- Changes to paydays require advance written notice to your employee.
Mileage Reimbursement
Texas doesn't require mileage reimbursement, but you must reimburse necessary work-related driving if those costs would otherwise reduce your employee's wages below the federal 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
Under Texas Labor Code §61.018, each pay period you must provide your employee with an earnings statement showing: employee name, rate of pay, total earned in the pay period, any deductions, and total hours worked.
Texas is simple — but payroll still has to be done right.
Nest Payroll handles federal payroll, Texas SUTA, W-2s, and Schedule H — starting at $42/mo. 14-day free trial.
Time off & leave
Texas does not have a state-mandated paid sick leave law, paid family leave program, or required vacation time. Time off is at your discretion as the employer — but offering some PTO is strongly recommended for retention.
Sick Leave
Texas does not require any paid or unpaid sick leave for household workers. Several Texas cities (Austin, San Antonio, Dallas) had passed local paid sick leave ordinances, but the Texas Legislature passed HB 2127 in 2023 (sometimes called the "Death Star" law) which preempted these local ordinances. No Texas city or county currently requires paid sick leave for private employers.
Even though it's not required, offering some sick leave is a good retention practice. A typical household employer offers 3–5 paid sick days per year.
If you offer sick leave: frontload, don't accrue
If you do offer sick leave, the simplest approach is frontloading — give your employee the full annual amount upfront at the start of each year (or pro-rated at hire). This avoids tracking accrual rates and unused-time reconciliation. Two universal advantages of frontloaded sick leave:
- No accrual tracking. No per-hour rate to monitor.
- 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. Same applies to a voluntary sick leave benefit you offer in Texas, if your written policy makes the no-payout rule clear.
Vacation & PTO
Texas does not require paid vacation. If you offer it, document your policy in writing — Texas law doesn't require payout of unused vacation at separation unless your written agreement says it will be paid out. To preserve flexibility, state your vacation policy explicitly in your work agreement.
This is the policy-default rule with forfeiture allowed: silent policy = whatever Texas case law decides; clear written policy = whatever you wrote. Texas is one of the states where you can adopt a "use it or lose it" or no-payout-at-separation policy, provided it's clearly documented in writing at hire.
For any portion of vacation that does have to be paid out under your policy, 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 — even when frontloaded.
- Keep sick separate from vacation. If you combine sick and vacation into a single "PTO" bank, the entire balance gets characterized as vacation under your written policy — and if your policy says vacation is paid out, you'll owe the full combined balance. Tracking sick separately preserves the option to handle it differently.
- Document forfeiture explicitly if that's your intent. A silent policy can leave the question open. If you want unused vacation to forfeit at year-end or separation, write that into your work agreement at hire — don't rely on silence.
- Vacation pays pro-rata, not the full balance. If your policy provides for payout and you frontloaded 80 hours on January 1, your employee leaving June 30 has earned 40 hours pro-rata (not 80). Subtract any used hours from the earned portion to get the payable amount.
See our Frontload PTO Payout guide for the full pro-rata framework, worked example, and tax treatment.
Upon departure
Texas law has specific timing requirements when employment ends. Both rules come from Texas Labor Code §61.014:
| Situation | Final Pay Due |
|---|---|
| You terminate the employee (fire, lay off) | Within 6 calendar days |
| Employee resigns or quits | Next regular payday |
Earned-but-unused vacation: Texas does NOT require payout of unused vacation or sick time unless your employment contract or written policy specifies it. If your policy provides for payout, 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 the 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 TWC filings with the Texas Workforce Commission (state Unemployment Insurance)
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 TX household employee legally?
Nest Payroll handles EIN setup, TWC 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. Consult an attorney, financial advisor, or licensed insurance broker for your specific situation.