You may not be aware that if you are paying someone to provide caregiver services for yourself or a loved one, there are major tax breaks available to you. Following are some guidelines from the IRS to show you how to put those precious tax dollars back in your pocket!
IRS Tax Deductions To Help You Save Money On Home Health Costs…
1. The services do not have to be performed by a nurse as long as the services are similar to those generally performed by a nurse. This includes services connected with caring for the patient’s condition, such as
giving medication or changing dressings, as well as bathing and grooming
the patient, and they can be provided in the home or in another facility.
2. Qualified long-term care services such as diagnostic, preventive, therapeutic, and rehabilitative services, and maintenance and personal care services (prescribed by a doctor as part of a plan of care) that are: Required by a “chronically ill” individual, which refers to someone who within the previous 12 months has been certified by a licensed healthcare practitioner (such as a doctor) to have the following conditions:
- Unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) without substantial assistance from another person for at least 90 days.
- Requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
3. Maintenance and personal care services is care that provides a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment).
4. Checks must be written to a home care agency or an employee. In order to claim your tax deduction, you must pay your in-home caregiver as an employee or through an agency. Payments made to someone under the table (they have no plans to pay income taxes) will not qualify for a tax deduction.
5. You can also receive “Dependent Care Credit”. This is a deduction for money paid by you for care of a dependent adult or child during either time at work or time looking for work. For example, if you hired someone to care for your aging mother while you were working, a percentage of the money paid to that caregiver or agency is deductible on your taxes, depending on your income. Of course, the “dependent” must qualify as a dependent under IRS regulations, and must live in your home. For details and answers to your individual circumstances, contact your accountant, attorney or visit www.IRS.gov.
Hiring Caregivers Privately vs. Through an Agency: Three things you may not find out until it’s too late!
1. A huge personal safety risk.
Like most, you are probably not experienced at screening in-home caregivers. Without background checks, reference checks, and adequate screening you could find your personal safety at risk. Finding a competent, qualified person that will fit into your home is not always an easy task. Often you will have several caregivers before you find the right one for you. Are you prepared for this time commitment in addition to the emotional stress of making difficult decisions for your loved one? Do you feel qualified to train a caregiver on your own? Most people would say no.
2. You could jeopardize your financial security.
When you hire a caregiver to work in your home, there are a multitude of legal concerns. According to John Paine, attorney at law: Those who employ caregivers (in this case, you are the employer) are skittish about the withholding and reporting requirements if the workers are employees. However, claiming that the helpers are independent contractors is very dangerous. They often want to collect their pay ‘under the table’ because they intend to pay no taxes at all. If it is determined by the IRS that the person is an employee and the employer was not withholding taxes, the employer [that’s you] will be forced to pay both the employer’s share and the employee’s share of payroll taxes. Including interest and penalties, this would come to at least 25% of the total wages paid!
When you are paying one of these ‘independent contractors’ there is always the danger that he or she will leave on bad terms, or due to an injury. Those situations can also get very nasty and expensive. Then the employer [that’s you] could be liable to pay unemployment benefits or an injury claim, not just the unemployment tax or worker’s compensation insurance. In other words, the only safe way to have people work in the home is to either pay an accountant to keep track of the tax issues, or pay a reliable home care service agency to provide the services.
3. NO backup plan.
Perhaps most important of all, you want to have the peace and security of knowing that your loved one is well-taken care of at all times. You do NOT want to wake up one day and find out that the caregiver has a sick child or is sick themselves and doesn’t know when they will be able to return to work. Who will be there to take care of your loved one while they are unavailable? Maybe NO ONE. When you don’t have a backup plan, you can’t be sure that your loved one will have the ongoing care they need.