Caregivers: Are You an Employee or Self-Employed? (Knowing the Difference Matters)

chimeinconsults2
Jan 3
3 min read

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Caregiving is hard work, but figuring out how you get paid shouldn't be. Whether you are caring for a parent, a neighbor, or running your own business, your tax status changes based on who you are and how you work.

Here is a breakdown of your tax status.

1. The Golden Rule: Are You an Employee?

The first thing to understand is your official status.

The "Control" Test If the family you work for controls the details of your job—like what time you arrive, exactly what you cook, or how you perform tasks—the IRS considers you a Household Employee.

Why this matters:

You are rarely an Independent Contractor. Unless you set your own rates, bring your own supplies, and have multiple clients, you should generally not receive a Form 1099.
Family Caregivers are Employees too. Even if you are related to the person you care for, you are still an employee in the eyes of the IRS. However, families get special tax breaks (see below).

2. Three Common Scenarios: Which One Are You?

Find the scenario below that matches your situation to see how your taxes work in 2026.

Scenario A: The Family Member (The "Personal" Role)

You care for your mother or father in their home. They pay you $600/week.

Your Status: Household Employee (Family).
Do You Pay Social Security/Medicare? NO. Because of the "Family Exception" (caring for a parent, spouse, or child under 21), neither you nor your parent owes FICA taxes.
Do You File A Tax Return? You must report this income on your Form 1040.

Scenario B: The Non-Relative (The "Nanny Tax" Role)

You care for a neighbor or friend. They pay you $4,000 total in 2026.

Your Status: Household Employee (Non-Relative).
Do You Pay Social Security/Medicare? YES. Because you earned $3,000 or more (the 2026 threshold), "Nanny Taxes" apply.
- The Cost: 7.65% is withheld from your pay, and the employer pays a matching 7.65%.
Do You Pay Self-Employment Tax? NO. Do not let the family give you a 1099. If they do, you will be stuck paying the full 15.3% tax bill yourself!

Scenario C: The Professional (The Business Owner)

You care for three different seniors in their own homes. You set your own rates and bring your own supplies.

Your Status: Self-Employed (Independent Contractor).
Do You Pay Social Security/Medicare? YES. You pay the full 15.3% Self-Employment Tax on all your earnings.
Paperwork: You report this on Schedule C and Schedule SE.
2026 Update: The reporting threshold for 1099 forms has increased to $2,000. Even if you don't receive a form, you must report every dollar earned.

📊 Quick Summary Table

If you care for...	And you have...	Your Status	Do you pay the 15.3% SE Tax?
Spouse / Parent	1 Client	Family Employee	NO
Non-Relative	1 Client	Household Employee	NO
Anyone	Multiple Clients	Business Owner	YES

⚠️ A Warning About "Under the Table" Cash

It might seem easier to just take cash and not report it, but this creates two major risks for you and the senior you care for:

1. The Medicaid "Look-Back" Risk

If the senior ever needs Medicaid to pay for a nursing home, the state will review 5 years of their bank statements. If they see cash withdrawals with no paper trail (like a W-2 or employment contract), they may label those payments as "gifts." This can disqualify the senior from receiving the benefits they need.

2. Your Future Retirement

In 2026, you earn one Social Security credit for every $1,890 in reported earnings.

If you don't report your income, the government assumes you didn't work.
This means you are not building your own Social Security retirement fund or eligibility for disability protection.

Being a caregiver is a professional job. Ensure you are protected by having a clear employment contract and reporting your income correctly. It protects the senior’s benefits and builds your future.