What are the tax implications for payment from a parent living in my home?

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My mother lives with me & I am her total care giver 24/7, for which she pays me well, (at her instance ) as an alternative to a nursing home. I take care of all expenses with the exception of her medical needs, for which she has insurance.
She is legally blind, has limited hearing & uses a walker. Originally her payment to me was at the "gifting limit" but as she now requires more help she has raised the amount (again at her instance). Do I have to declare it as income & can I deduct the gifting allowance from the reported amount? And can she declare it on her tax return as an expense?

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To the people implying that being paid for being a caregiver is taking advantage, I say shame on you. I care for my parents full time, in their home, and so I'm unable to hold down another job. If I didn't do it they would be paying as much as $300/day for 24 hour care. I pay myself, and the family friend who gives me a couple of days off each week, $100/day. I have sacrificed a lucrative career to do this, but do so gladly to know they are getting quality, loving care. you shouldn't be so judgmental.
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Ia2868, Some questions before the commentary......Do you have DPOA from her, appointing only you? Do you prepare her Tax Return? Do you prepare your own Tax Return? I would seek advice from a CPA on the Form "Care of the Elderly". Do you each have your own checking accounts (separate)? Some accountants do not charge for a consultation, only when they actually file your Return. Comment: Hopefully you have access to her deposits, such as her S.S. checks and her pension checks. Good Luck.
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Nojoy, I agree with you 100% and your Mom is getting one on one care which is priceless! I am taking care of my Mom also in my home but her money ran out after a few years. She is still with me, we are starting 8 years now. Our CPA is the one who told us how to do things financially when Mom had the money also. He said 8 hours a day and after thats its daughterly duties thru the night. His average pay was $15 an hour, 8 hours a day. Hang in there, its such a long road.
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She cannot deduct what she pays you as an expense. Only skilled nursing services are tax-deductible. You will, of course, want to check this with your tax preparer, but I believe I am correct.

If your mom is exceeding the gifting limit, then she should be withholding Social Security from your check, and you should be reporting it. You say, "I take care of all expenses," which, I assume, is out of the money mom pays you. Have HER pay those expenses instead of passing that money on to YOU to pay them. They aren't deductible to you, and you would be taxed on the money she gives you to cover them.

You're in murky waters. If you ever anticipate your mom needing Medicaid -- in other words, if there's any question that she might not be able to pay for a nursing home out of her own funds, you really need the advice of an elder law attorney. Otherwise, all the money she's paying you would be considered a gift and would cause Medicaid to make you, in effect, pay that money back.

If you deducted the gift allowance from the money she's paying you and were ever audited, you can be sure you would have to pay taxes and penalty on that deduction. I believe that might even be considered fraud. ??

Talk to a CPA and an elder law attorney. It's very important that you have your i's dotted and t's crossed when it comes to your mom paying you for her care. Lots of ramifications. It's a very specialized area. And tricky to get it right.
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Suemac, the wonderful part is that she is aware and grateful. So many caregivers here would keep them forever, but the patient loses reality, becomes very critical and sometimes delusional. So if you reach that point, when mom throws things at you and curses you and thinks you are the enemy, you will understandably forgive us. It can happen soon, or not at all.
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If you set yourself up as a business, caring for your parent, I suspect that the $14,000 (that figure used only because it' s been used before, but it looks like it came from the IRS gifting limit), could be declared on a Schedule C as income, and all the food expenses, his bedroom space, all his Depends, car trip to the doctors, etc etc all those could be deducted as business expenses, and in the end, you would not have made any money, so then you wouldn't be paying any tax on this "income." Just an idea---I am not a tax attorney (but I am a small business owner).
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I agree that educating yourself regarding the Tax laws/rules is advantageous to you both. When informed, better decisions can be made as well as a 'Plan for Mom' and her estate. I am speaking from experience. Find an Estate Attorney, develop a plan, and be realistic with living accommodations needed. The focus is the best care for your parent, which Is livable for the adult kids taking care of them. Remember: The parent's Estate is for their care and best interest. (Not to skimp in later years and leave it to family members.)
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S6PEREZ: POA has nothing to do with tax consequences on either the Return, Form 1040, of the mother or the daughter. My personal thought is that the POA, which ceases with the death of the donor, should not be the same person who is the Executor of the deceased's estate.
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Thanks for all the helpful answers. I'm going to go with my first instinct....see an accountant. I definitely want to do this correctly & above board & not have to worry about it. All the input from everyone has helped me know what questions to ask.I'm glad I found this forum & will probably use it more, if for nothing else, a place to vent when the going gets rough.
Thanks again.
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First of all, do you have a caregivers contract in place? Second, you taking care of her is medical If she cannot live alone, doctor agreed. Then, she should pay you about $900-1000 a week and you have to pay taxes on it. Hold aside about 30% of whatever she pays you for taxes. Do this right, siblings can come after you when they change their tunes in the end and get greedy. Go see and accountant and lawyer if the DPOA and your Mom agrees. They are not a dependent on taxes, been doing this for years.
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