If you pay an employee-caregiver more than $2,000 per year as of 2017, or $2,100 or more per year starting in 2018, you have to take Social Security and Medicare taxes out of her pay. If you pay more than $1,000 in a single quarter, you also have to pay unemployment tax. You never have to withhold federal income tax, though you can if she requests it. If your "employee" is your spouse, your under-21 kid or your parent, you don't have to take out any withholding, even if you pay her for helping you. The IRS 926 publication provides further information.
If a caregiver is self-employed, he or she can deduct business expenses from his or her taxes. Self employed caregiver tax deductions can include supplies, uniforms, equipment and insurance.
When You're Not Sure
If you're not sure whether your caregiver is an employee, you can use Form SS-8 to ask the government to make the call. If the result is "employee," the IRS recommends you contact your state government. State law determines whether you have to withhold any state taxes from his pay and whether you have to take out workers' compensation insurance. The insurance covers employee injuries. Your homeowners liability policy won't protect your caregiver if he's hurt on the job.
