Free Payroll Tool
See what your payroll provider really charges
Most providers hide per-run and add-on fees. Audit your real cost per employee in about 30 seconds, free.
Run the Payroll Fee Auditor →Blog · Payroll Management · Home Health
Home Health Agencies: Payroll Tax Guide (2026)
Payroll tax for a home health agency is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the home health agency items this page cites: IRS Notice 2014-7 Q&A (Q11, Q16, Q18) and IRS Notice 2014-7 Q&A (Q7. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to home health agencies
Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1.
An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable.
The stack every home health agency runs
On one of the home health and personal care aides at the May 2025 national median of $35,800, the employer share of Social Security and Medicare is $2,739 a year, FUTA is $42 after the 5.4 percent state credit on the first $7,000, and income tax withholding follows the employee's W-4. Deposits are monthly or semiweekly depending on the prior lookback period, with a next-business-day deposit whenever $100,000 accumulates. Form 941 is due the last day of the month after each quarter; W-2s and any 1099-NEC at the $2,000 threshold are due January 31.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1. [IRS Notice 2014-7 Q&A (Q11, Q16, Q18)]
- An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable. [IRS Notice 2014-7 Q&A (Q7, Q15, Q20)]
Read the full guide to how to calculate payroll taxes, and the rest of the home health agency payroll library.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
Home health agency payroll tax: IRS Notice 2014-7 Q&A (Q11, Q16, Q18)
Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1.
Home health agency payroll tax: IRS Notice 2014-7 Q&A (Q7, Q15, Q20)
An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable.
What is the employer tax cost on one of the home health and personal care aides?
At the $35,800 national median (BLS OEWS, May 2025): $2,739 in employer Social Security and Medicare, $42 in FUTA after the state credit, plus state unemployment at the employer's assigned rate.
What does managed payroll cost for a home health agency?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Visit-based aide pay, travel time reimbursement and Medicaid billing vs payroll are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Home Health Agencies. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
From the blog