Mom lives with me and I do not claim her as a dependent. She has a monthly pension and social security. She pays me a monthly fee for providing home health care. She is not chronically ill, but cannot live alone. I help her bathe, prepare meals, provide medication, do laundry, etc.
Can she claim any maintenance and personal care federal tax deductions related to what she is paying me ?
If you aren't reporting the income on your own taxes, it's considered being paid 'under the table' to avoid taxes. If you do report it and pay taxes on it, then by all means give her the deduction.
If you count the money as rent it is not taxable
"An amount of money that your parents give you to offset their expenses isn't taxable to you. This amount is treated as support provided by your parents in determining whether your parents are your dependents."
So better to have it as rent then caring for a parent.
What I do know is that what your mom claims as payment to you will have to be reported by you as income on your tax returns. Your mom will need to issue you a 1099-Misc so that you can file it.
I guess your Mom makes above $14,250 her SS income if she still needs to pay income tax.
"For 2022, people over 65, single, and who have more than $14,250 in income outside of their social security income will need to file a tax return. Seniors who are married will need to file if their non-social security income is over $28,700."
Always, always, Always visit with an elder law attorney to learn about responsibilities associated with being the employer of a caregiver.
Yearly gifts mess up Medicaid qualification!
If she claims the amount of money that she gives to you as an expense, then you will need to claim it as income on your return.
Either she or you will/should pay all the other pieces to make it legitimate and especially if she pays you more than $2,300/year. She could pay the "pieces" as an employer or you could pay the pieces as an independent contractor.
If you don't want to consult a CPA, you could get a copy of TurboTax for Home and Business or one of the Tax programs that will allow you to file a Schedule C for yourself. Start putting in all the numbers, using last years figures, then add to the form for the 2 scenarios, one where you are a contractor and one where you are an employee of your Mom. Make sure you enter all her medical expenses for last year, even though she took the standard deduction.
That will give you a rough idea of whether it will be worth the effort or not. I am not a CPA, however, I will tell you that I find taxes more fun than most people. If you are like me and find taxes "fun", I would suggest that you forecast how this is going to affect both your Mom's and your tax return before making the final decision.
Warning: if your Mom gave you over $15,000 in 2021, you are over the gift tax exclusion, and your Mom was supposed to pay a tax on the "gift". However, there are ways to not pay this tax now. So before you make a final decision, I would run it by a CPA. Starting your own business is easy. Its all the other stuff that you have to do that takes additional vigilance...and if you don't take the time to do the pieces correctly, you could trigger a visit from the IRS and they will figure out the payment and potentially, penalties. Ignorance is not an excuse for not paying your taxes....and don't forget to factor in the state income tax too, if you have one.
It depends:
Do her expenses qualify?
https://www.irs.gov/publications/p502#en_US_2021_publink1000178975
Note the requirements for medical certification and plan of care.
Does she already itemize deductions or does she use the standard deduction? If all of her medical expenses exceed 7.5% of her income she can deduct the excess with her other itemized deductions, including her mortgage interest, charitable donations, and state taxes. If the standard deduction is better than itemizing, there is no benefit.
Also check to make all paperwork is in order.
Is she conforming with payroll tax requirements? When one submits the deduction claim, the IRS requires proof so that they can verify that appropriate SS, Medicare, etc. are collected.
Are you claiming the income on your taxes? The IRS will follow the money to make sure that you are also paying required taxes. Reimbursements for expenses (rent, groceries, utilities, etc.) may be treated differently than compensation for services.
You can consult an appropriate professional for details. If Medicaid is a possibility in the future, make sure that you are well informed about what a personal care contract is.
Agingcare.com/articles/personal-care-agreements-compensate-family-caregivers-181562.htm