The Parent-Childcare Exception for Parent Caregivers

If you hire your parent to care for your home or children, their wages are usually exempt from both FICA and FUTA — meaning no federal payroll tax for either of you. However, there's one specific situation, called the parent-childcare exception, where FICA still applies. We've broken down exactly when it kicks in, why, and what to expect.

The default rule

When you employ your parent (the grandparent of any child receiving care), their wages are usually fully exempt from federal FICA and FUTA. Neither you nor your parent owe federal payroll tax on these wages.

When the exception applies

FICA applies to your parent's wages (but FUTA remains exempt) if all three of the following conditions are met:

1. Your parent is caring for your child in your home, AND

2. The child receiving care is either under 18, OR physically or mentally unable to care for themselves for at least four weeks of the calendar quarter, AND

3. You are divorced and not remarried, OR widowed, OR married to a spouse who — because of a physical or mental condition — can't care for the child for at least four weeks of the calendar quarter.

If any one of these conditions isn't met, the standard parent exemption applies and no FICA or FUTA is owed.

What this looks like on payroll

Federal tax	How it applies	Why
FICA (Social Security and Medicare)	Applies to all wages	FICA contributions are required because care is being provided in this specific family situation.
FUTA (Federal Unemployment)	Exempt	FUTA exemption still applies — no federal unemployment tax is owed.

When the FICA exception ends

The full parent exemption may be restored — meaning FICA stops applying again — if your circumstances change. Common triggers:

Your qualifying child turns 18 (and isn't disabled)
Your marital status changes (for example, you remarry)
Your spouse's condition changes such that they can resume caring for the child

If any of these happens, just let us know and we'll update your account.

What about state taxes?

The parent-childcare exception is a federal rule and doesn't determine your state tax treatment. State family caregiver rules apply separately. See the family caregiver tax article for your state for details.

Disclaimer: This information is provided for general educational purposes and should not be considered tax, legal, financial, or human resources advice.