@Viktor2419
First of all, it’s not clear to me whether a person can agree to be a independent contractor if the facts and circumstances of the situation would make them a household employee. However, as long as both your mother and her sister-in-law agree to file taxes as if she was an independent contractor, the IRS is not going to have a reason to get involved. If the sister-in-law decides that she does not want to pay 15% self-employment tax and would rather pay 7.65% Social Security and Medicare tax and have your mother pay the other half of the household employee tax, then the IRS will look at the facts and the circumstances of the dispute; the contract is only one factor, and it won’t even be the deciding factor if the other facts and circumstances make it clear that the sister-in-law was an employee. However, we can set that aside for the time being, and assume there won’t be a dispute.
Regarding medical expenses:
Your mother can deduct the portion of the care expense that is due to medical or nursing services. The services do not have to be provided by an actual nurse, but they must be of the type and kind of service that a nurse usually performs, which includes providing medication, assisting with eating, bathing, toileting, dressing, and so on. Companionship is not a deductible medical expense, nor is assistance with household chores like cleaning and laundry or meal preparation. If the caregiver provides all of these services, your mother would have to determine what percentage of the services are medical or nursing, and only deduct that percentage of the cost.
The entire expense of the caregiver can be deducted as a medical expense if your mother meets all the following tests.
1. Your mother is permanently disabled, which means that she has a condition which is permanent, or will last at least one year, or will lead to death, as certified by a doctor; or, your mother has a cognitive impairment and would be a danger to herself or others if left alone, also as certified by a doctor.
2. Your mother requires assistance with two or more activities of daily living. Activities of daily living are eating, dressing, toileting, managing incontinence, transferring, and bathing.
3. The care is provided according to a written care plan that is developed by a qualified medical professional or medical social worker, and is reviewed and updated at least once a year.
If your mother is disabled or cognitively impaired and requires assistance with two or more ADLs but she doesn’t have a written care plan, she can only deduct the portion of the care that corresponds to actual nursing or medical care. If she does get a written care plan, then expenses after the date the care plan is put in writing would be fully deductible medical expenses.
