Indiana Household Employment Taxes
Household employment in Indiana refers to situations where an individual hires someone to perform services in their home, such as nannies, housekeepers, or private caregivers. If you are an employer in Indiana and pay cash wages of $2,500 or more in a calendar year to any household employee, you are required to withhold and pay Indiana state income tax and possibly county income tax on those wages.
Key Requirements for Household Employers
- Wage Threshold: You must withhold Indiana state income tax if you pay cash wages of $2,500 or more in a calendar year to any household employee.
- Withholding Responsibility: As the employer, you are responsible for withholding Indiana state income tax from the employee’s wages and remitting it to the Indiana Department of Revenue (DOR).
- County Tax: Depending on the county where the employee works, you may also be required to withhold county income tax. County tax rates vary and must be determined based on the employee’s work location.
- Reporting: You must file Form IT-40PNR (Indiana Individual Income Tax Return for Nonresidents) or Form IT-40RNR (Indiana Individual Income Tax Return for Part-Year Residents) if you are a nonresident or part-year resident employer. These forms are used to report household employment income and tax withheld.
How to Calculate and Report Household Employment Taxes
Household employment income is reported on Indiana Schedule A, Section 1, Column B, which includes income from services rendered within Indiana. The employer must calculate the state and county tax based on the employee’s gross wages and applicable tax rates.
- State Tax: Multiply the employee’s gross wages by the Indiana state income tax rate (currently 3.23% for 2025, though this may vary based on filing status and income).
- County Tax: Multiply the gross wages by the applicable county tax rate. County rates vary; for example, Marion County has a rate of 1.5%.
- Total Tax Due: Add state and county taxes to determine the total tax liability.
Employers must also complete Schedule IT-2210A for annualized income calculations if they are filing as a nonresident or part-year resident. This schedule helps determine the correct amount of tax based on the period of employment within Indiana.
Important Notes
- Employers must complete their federal Form 1040/1040-SR before filing Indiana state returns. Line numbers from the federal return are referenced in Indiana instructions.
- If you are a nonresident or part-year resident, you must file Form IT-40PNR instead of Form IT-40RNR if you have other types of Indiana-source income besides wages.
- Income from sources such as interest, dividends, or gains from securities is generally not subject to Indiana tax for nonresidents unless derived from an Indiana business.
Source:
Form IT-40PNR
Form IT-40RNR
Schedule IT-2210A
Indiana State Instruction
Disclaimer: Always verify with the Federal or State Department of Revenue Forms and Instructions for the most current and accurate information.