With long-term care costs for nursing homes and assisted living facilities skyrocketing, many families are looking for alternatives to placing their aging family member in a facility. One alternative is in-home care. Before choosing this alternative for your family member, there are issues that need to be considered and addressed.

Paying for the care

In general, there are two ways to hire someone to provide in-home care for your family member:

  • Hire a senior care staffing firm. In this situation, you hire the firm, not the individual caregiver. The firm will send the caregiver to your home and take care of all payroll requirements such as payroll taxes, workers compensation insurance, and wage and hour laws. The caregiver may be the same person all the time or there may be different caregivers, depending on the circumstances and the policies of the senior care staffing firm.
  • You hire an individual to provide the in-home care. In this situation, you become the employer and are responsible for the payroll requirements. You must abide by federal and state minimum wage laws and overtime laws, submit payroll taxes, and provide workers compensation insurance, if required. The benefit is that you are in control of who is providing care to your family member.

Tax benefits

  • If the family member requiring care is your dependent for tax purposes and you (and your spouse) need someone to care for the family member so you can work or attend school full time, you have two tax savings alternatives:
    • Utilize the dependent care flexible spending account offered by your employer, if available.
    • Take advantage of the Dependent Care Tax Credit on your tax return.
  • If the reason for the care has a medical purpose, which most do, and the family member requiring care is your dependent for tax purposes, you have two other tax savings alternatives:
    • Utilize the medical flexible spending account offered by your employer, if available.
    • Take the medical care tax deduction on your Schedule A (itemized deductions).
  • CAUTION: The expenses cannot be used for multiple tax breaks. For example, if the cost of the in-home care is $12,000 and you put those costs on your Schedule A, you cannot also use the same $12,000 to qualify for the Dependent Care Tax Credit.
  • If the person receiving the care is the one paying for the care, that person can take the medical care tax deduction on his/her Schedule A, itemized deductions.

Ways to save on the cost

Your family member needing in-home care may be eligible for benefits to help pay for the cost of the care.

  • Long-term care insurance — check the policy to see what services it will pay for.
  • VA benefits — the VA can provide benefits for in-home care for a veteran and/or their spouse.

Let us know if we can help you navigate this process. Email me at [email protected] or call 402-502-0250.

Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.

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