Financial News About In-Home Care for Seniors


tax ramifications of in home care for seniors

Some of us have parents who are now in their mid 80’s, and taking care of a home, and themselves, is becoming more difficult. There are medications to manage, physical limitations that weren’t an issue before have cropped up, and the memory may be slipping a little as well.

Perhaps your parents or loved ones are ready to go to an assisted living facility, where they can be relieved of household chores, grocery shopping and such. It could also be that your parents don’t want to go anywhere, they want to live out their lives in their own home.

I just read a great article about how one can pay for in home services the proper way. It is featured in, and was written by Tom Breedlove

“In-home, private-duty senior care is one of the fastest-growing segments of the care industry. The high cost of facility-based care, coupled with the desire to enjoy the comfort and convenience of home, makes employing a caregiver an increasingly popular option for families.

Additionally, recent legislative forces, such as the Department of Labor’s clarification on the companion care exemption, have driven up the cost of utilizing an agency for certain types of caregivers. More than ever, families are consulting with trusted experts to set budgets and understand what solution works best for them prior to hiring someone to work in their home. Many times, the result is becoming a household employer and taking on the responsibility of managing the caregiver themselves.

If you have a client who needs private-duty care for an elderly loved one, several topics need to be addressed so you can advise them on the right course of action.

Employee vs. Independent Contractor
There is a common misconception that senior caregivers privately employed in the home can be labeled as independent contractors so that payroll taxes can be avoided. However, the IRS has ruled that the vast majority of these workers should be classified as employees because the family has the right to control how, what, when or by whom the work should be performed. It does not matter how many hours they work, how much they are paid or what they are called in a work agreement. Misclassifying a household employee as an independent contractor (by providing them Form 1099 instead of Form W-2) is considered tax evasion in the eyes of the IRS.

Tax Breaks
Families that employ a caregiver—and pay him or her legally—can take advantage of tax breaks that can largely offset their employer payroll taxes. For many, the tax savings can significantly offset the cost of employer taxes. The tax breaks available to most families with caregiving needs are:

• Dependent Care Account (a type of Flexible Spending Account specifically for dependent care needs)
• Dependent Care Tax Credit (IRS Form 2441)
• Medical Flexible Spending Account (used only for medical care)
• Medical Care Tax Deduction (itemized deduction for qualifying medical expenses)”

You can read the rest of the post at, and if you are interested and learning more about how to handle the employment of in home care for a family member, make an appointment, come see us, we will help you sort it out!

DiSalvo and Company  CPA

Vero Beach Certified Public Accountant

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