I care for my mom who has dementia 24 hours a day 7 days a week. I get paid 25,000 a year from her estate. Do I have to pay income tax?

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I do this legally and yes you do have to pay them or you couls be liable in the future to pay it all back. Your taxes will be about 30% so save it before taxes are due. 25K is awfully cheap. You should be getting $900 a week on average, this will help with the taxes you pay, Out of that 25k you will be paying $7,500 a year. Does your pay include the heat up high, her food and pills and clothing? There is a lot to understand about this. I did it until my mothers money ran out but her SS pays her enough for me to hire a weekend caretaker so I can get out
for a break. My hat is off to you, theres no place like home!
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How wonderfu of you to do this for you mother! What your doing is priceless and if she had to pay for care outside of you, tremendously more expensive! Please take care of yourself so that when this time of caregiving there will be you-lefted to live your own life!
I took care of my mother for years, mostly without pay. She was a difficult person. My brothers did little. She died and everything was split three ways with my brothers being in charge of my inheirtance. So please take care of you, use respite care, take trips, vacations, evenings off every week! No one deserves your health so that you can be happy. I found MBSR and meditation as the most helpful support for me. Explore options you want! Be compassionate with yourself! God bless...any tax.accountant or trust-estate lawyer SB able to answer your question.
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donna - couple of issues here. The 25 large is income and reportable. If you don't have enough previous work to have you own SS to draw from in the future, it might be worth it to do late filing and penalty for the years you have "worked" to build your SS retirement history. Mom isn't going to be there forever to give you 25K.

If your mom should need to go into a NH and she does not have the $ to private pay for NH and applies for MedicAID to pay for it, there will be a lookback period of up to 5 years. So if based on today that would be August, 2017 for future lookback or if she went into a NH tomorrow could go back to May, 2007.

Now the $ she pays you for care, could be subject to a "transfer penalty" as the $ is regarded as a gift from her to you, your caregiving can be considered to be love and care and not reimbursable . The transfer penalty is different for each state as it is based on each states NH reimbursement rate. Example in TX it's about $ 148 a day as TX has a low rate, so 25K would be about 170 day transfer penalty in which you have to private pay for the NH. The sticky part about this is that it can happen that the elder qualifies for NH on Medicaid in the initial 3 or 6 months of paperwork review....they get into the NH....then a few months later, when the state has done a full review and go back 3 or 5 years in banking, SS or property records, that you get a notice of a "transfer penalty" from state Medicaid program and a bill from the NH for private pay due immediately. You can in writing do an appeal, but this is all very paperwork intensive and you likely need legal to help.

What I'd suggest is to get around the gift by doing a "personal services contract" for your mom to pay you for caregiving and she files a IRS 1099 for it and you pay taxes on it. This needs to be done by an elder care attorney who practices in your state and the county in which the house is as they will know what passes best.
Also when you go, get all her other legal updated too: DPOA, MPOA, will or codicil to will, and also an "Guardianship in Case of Incapacity" (or whatever it's called in your state done - this helps for when the dementia patient wants to revoke the POA's). Good luck and pay those taxes.
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I have finished three years of caring for my Mom 24/7 and now have the luxury of a little time to think. Standing back and looking at the issue of family caregivers and taxes, I have a few points to make. The tax code is primarily written for people who have "a" job. Typically 8 hours a day, five days a week, and who have typical expenses. All the rest of the code involve nips and tucks on that model for special interests and some circumstances. Are caregivers not a special interest? No, because they have not made themselves so. What caregivers are doing is providing medically-necessary care 24 hours per day, seven days per week, with no holidays or vacation. This is a completely different institution, one that is not adequately defined in the tax code. In the tax code which is still based on that 40-hour sane working week medical expenses must crest 7% of net income (soon to be 10% I believe) in order to claim the residue and the related expenses (transportation, etc.). For incapacitated family members, the medical and related expenses are immense, requiring a large income, or else the family donates tens of thousands of dollars per year which they are unable to claim unless they claim the family member as dependent, which leaves the dependent's income completely taxable. The tax code just doesn't make sense. What the tax code incentivizes is this: NO FAMILY CAREGIVING. Sell up everything, put the person into a facility that provides the level of skills required, spend down everything until Medicaid takes over. Protect your own work career, your social security investment, enjoy evenings, weekends, holidays and vacations off, have a life (probably longer because you will also have your health), relieve the stresses of carrying the can for the entire family while siblings and "heirs" squabble, trivialize your efforts, and otherwise take pot shots at you, and let the folks in Washington, DC figure out how they bungled it.
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I have similiar question. I care for my mom 24/7 also. She refuses to take taxes out when she pays me "under the table"monthly. I havent reported any income, I am a bit nervous as to getting in trouble what should I do? I believe she wouldnt be able to figure the taxes,too confusing and I dont want to upset her. she has dementia also
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NURSECAREBEAR, its not up to your mother to take out taxes, its your responsibility to pay the taxes on it. if anything should happen to your mom in needing money, they will come to you. you should make out a caregivers contract, have her pay you, and then pay your taxes on it. as i said before it comes out to about 30% of your pay. we use an accountant and there is no way out, its absolutely outrageous but you have to cover your behind, pay now, instead of later. If your mom has dementia, even worse, someone can say you are taking it. good luck!
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To the first answer. I am sorry I should of said from my mom's money from the sale of her house. Thank you! I'm not sure if this will make a difference with claiming on income tax. Thanks Again!!!
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Please consult an accountant or lawyer about this. Your mother can gift you up to about 15K a year tax free. Over that the tax bill is hers. And I don't know why you would have to pay 30% tax rate on 25K, or maybe I misunderstood.
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SusanJMT - I love the ending of your post, very funny. Sad and pathetic issue. Caregiving was taken for granted by men in the economy and local communities struccture before the 50s, so sorting out the best way to add care and love, has never been carefully addressed. Many conversations needed to devise models to help families face and pay for what is best and fair and legal for family caregiver (including money set aside for their retirement later) and care for care-needing relative - which would include not just supplies, food, transportation time for health issues but structured visits, one on one time - the section on hospice in today's posts said one value of hospice is that it will bring in "music therapy" and one on one time. I believe in those times, deeply. As caregiver for a 106 year old that I grew to love, I was adding in those very things, testing to try to find healing ways to interact - they included my taking short breaks away from brief belligerence, slowing down and being myself with her - it was wonderful time, for her, and she gave wisdom and kindess to me. I did that on top of the nurses' aide tasks, for which I was paid. She was thriving with a stable care team, even though her family were old as well, and far away. And I was fired. Over a miscommunication with new office RN and management. Because I acted as if I knew what I was doing, and she found that a challenge to her. The company needed her more than one aide. I'm trying to stay on topic here, and feel that I am, because our culture has learned to create institutional professionals, and then delegate care to them. The "objective" professionals are preferred to messy love-related-care, maybe mostly to avoid squabbles between generations and siblings, in a newly (70 years?) mobilized world - a world which adds excitement and opportunites, but also adds haste and leaves it confusing as to how we deal with all other parts of our fragmented families with love and also practicality and respect for different needs. Sigh. I have asked, and I believe my company will turn my firing into a layoff, but my elderly client and I lose. This conflict between what professionals are taught to value as "objective" versus the reciprocity, motivation, and sense of value we get when we stay close - we all have work to do, to pull new definitions together to benefit us all.
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Castle - your comments give a fuller picture than has been considered in many of the caregiving discussions. There is the continuum of observation and care that the short objective evaluations devalue but that sometimes hold the key to the patient's illness. Trained professionals have not only missed, but exacerbated several of my Mother's conditions and it required that I leave my job to take up the day-to-day caregiving to make her healthier. I also know what makes her tick, mentally. I suggest you start a new discussion thread in the Caregiving supertopic (a couple of levels above this topic in the topic hierarchy). I started a discussion on the benefits of family cargiving to the country and the "fairness" of the federal tax code. There are so many parts cargiving, only those who experience it can even imagine what it is all about. You and others are the experts on day-to-day beneficial caregiving. There isn't enough "in the book" to adequately advise professionals who are working "by the book" alone. Please do start a new discussion. Expand on the topic and then let's raise it to our medical professionals, assisted living administrators, and other caregivers. Quality day-to-day living for an elder patient is not or should not be a matter of 15-minute medical appointments and hours in front of the TV.
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