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 ?
Agingcare.com/articles/personal-care-agreements-compensate-family-caregivers-181562.htm
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.
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.
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.
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