Navigating the roadmap of senior home care can be challenging, and the everchanging laws make it even more overwhelming. We are receiving an increasing number of emails regarding the so-called "Nanny Tax," and other concerns surrounding private household employment of senior home caregivers. In response to these questions, we decided to address the top three Elder Care FAQ’s
1. I have a senior home care worker working in my home. Do the "Nanny Taxes" apply to me?
Including nannies, a domestic worker is defined as an aide, companion, housekeeper, cleaning lady, maid, cook, personal assistant, house manager, caretaker, butler, valet, and driver. Almost all household workers are employees, not independent contractors, and understanding the difference between filing a W-2 and a 1099 is key.
Since the senior home care worker is an employee, who the employer is needs to be determined. If the worker comes from a home care staffing agency and is payrolled by the agency, you are off the hook and the home caregiver is the employee of the agency.
If you privately hired or hired through a registry or senior home care referral agency, and YOU pay the worker either directly or by payment collected and disbursed by the registry, YOU are the employer.
Read more about payroll tax requirements of the Internal Revenue Service here.
2. Can I hire my daughter as a caregiver?
Some families are fortunate enough to have a family member willing to provide elder care and wish to compensate them for their work, especially if there are lost wages associated with the care. In most situations, the IRS considers employed family members taxable employees.
Get more information on how to hire a family member as a household employee here.
3. I have heard that I can get a personal tax break for dependent care. Is that true?
There are two ways that families can minimize their personal income taxes to help offset the cost of dependent care. The first is through a flexible spending account, which may be offered by the employed spouse’s company. Another strategy is the Child/Dependent Care Credit, which can directly reduce the taxpayer's income taxes between $600 - $1,465 a year. Read more about the criteria for receiving a personal tax break for dependent care here.
If you would like more information about household employee taxes, download our Guide to Privately Employing Senior Home Care.