If you are paid to care for a spouse, parent, grandchild, or another relative, that money may come with tax responsibilities. Understanding how your caregiving arrangement is classified can help you report it correctly and plan for any taxes you owe.
Why this matters to our community
Blind and low-vision people are caregivers, too. You may be helping a parent at home, caring for your spouse, or looking after grandchildren. You might also receive assistance yourself. These roles can overlap, and neither one diminishes the other.
Penny Forward is sharing this IRS reminder because accessible financial education should reflect the responsibilities you actually have. When caregiving becomes paid work, knowing which questions to ask can make it easier to protect your household budget.
First, find out whether you are an employee
If someone hires you to provide care in their home and can control both what you do and how you do it, you are generally a household employee. An agency may be your employer instead if it controls the work. Being related to the person receiving care does not, by itself, settle your employment status.
The person employing you may have payroll-tax and reporting responsibilities, including providing a Form W-2. Some family wages receive special treatment for Social Security and Medicare taxes, such as wages paid to a spouse or a child under 21. Rules for parents and workers under 18 have exceptions. These are not blanket exemptions from income tax.
For the details, including when a W-2 is required, read IRS Publication 926, Household Employer’s Tax Guide (opens in a new tab).
Not every paid family caregiver is self-employed
You may receive taxable caregiving income without being an employee or running a caregiving business. In that situation, you may need to report the income without owing self-employment tax.
For example, the IRS describes a person paid by an insurance company to care for their spouse who does not provide care as a business. It also describes a grandparent paid by a state agency to care for grandchildren without operating a daycare business. In those examples, the payments must be reported, but self-employment tax does not apply.
The lesson is not that caring for one relative is always exempt. Your work arrangement and whether you operate a business matter. See the IRS family-caregiver examples (opens in a new tab).
Running a caregiving business changes the picture
If you operate a caregiving business, payments for caring for a relative can be business income just like payments from other clients. The IRS gives the example of a sole proprietor running an adult daycare business that serves several clients, including their grandmother.
Business income and expenses are generally reported on Schedule C, and self-employment tax may be due. This tax supports Social Security and Medicare; it is separate from federal income tax. Ask your tax preparer whether Schedule SE and estimated tax payments apply to you.
Check whether a Medicaid waiver exception applies
Certain Medicaid Home and Community-Based Services waiver payments may be excluded from federal taxable income when you and the person receiving care live in your home. This is a specific exception, not a rule covering every state-funded payment. It also does not automatically settle Social Security and Medicare tax obligations.
Before treating those payments as taxable or tax-free, review the IRS guidance on Medicaid waiver payments (opens in a new tab) with the program administrator or a qualified tax preparer.
A few steps you can take now
- Keep payment statements, tax forms, and any agreement describing your caregiving work together. Use a recordkeeping format you can access independently.
- Ask who employs you, which organization or program pays you, and what tax form you should expect.
- Tell your tax preparer whether you care for other clients, operate a business, and live with the person receiving care.
- Ask how to plan for taxes if nothing is being withheld, and whether state rules also apply.
If you need help filing, IRS volunteer tax-preparation programs (opens in a new tab) offer free basic return preparation to qualifying taxpayers, including people with disabilities. Check that a local site can handle your situation and discuss any accessibility needs before your appointment.
You do not have to become a tax expert to care for someone you love. Start by understanding how you are paid, keeping good records, and getting advice before filing. We welcome your financial-education questions at pennyforward@pennyforward.com.
This article provides general education, not individualized tax advice. It draws on IRS Tax Tip 2026-70, issued September 22, 2026 (opens in a new tab), and the IRS guidance linked above.
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