Taxation for Caregivers

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  • #5004
    todd
    Participant

    Each month my brother receives a $2000 check from my elderly walker-bound mother. This check is for:

    Caregiving: $1500
    Handyman/Gardening/Housekeeping: $300
    Rent assistance: $200

    The caregiving requires that he stay at our mom’s house 4 days/week. It includes ordering & dispensing meds, assisting mom to get in and out of bed, grooming, light cooking, transporting mom to appointments, encouraging and leading physical therapy exercises and fall prevention/quick recovery.

    My brother also does some gardening/handyman work for a few other people, from which he averages $150/month. He has no other income.

    Question 1: Which 1040 line should my brother put his monthly earned income of $1950 ($1500 + $300 + $150)?

    Question 2: Can my mom deduct her $1500/month caregiving expenses on her return?

    Question 3: Is there anything else we should know?

    #5033
    Florida
    Participant

    This is my take on question 1:

    He will pay both self-employment tax (15.3%) and income tax (10%) on the $1950 per month, $23,400 per year.

    Self-employment tax (medicare + social security) is 15.3% or (.153 x $23,400) = $3580.

    His income tax is calculated after deducting his standard deduction and deducting 50% of the amount of his self-employment tax. Income of $23,400 – $1,790 (1/2 SE tax) – $12,200 (standard deduction) = $9,410. His tax rate is 10% so he will owe $941 in income tax.

    Total tax will be $3588 + $941 = $4,529

    He will use Schedule C-EZ and Schedule SE to document his income and calculate his self-employment tax.

    His self-employment income from Schedule C-EZ will flow back to line 3 on Schedule 1 and then to line 7a on Form 1040. The deductible part of his SE tax (50% of the total SE tax) will flow from Schedule SE to line 14 in the Adjustments to Income area of Schedule 1 and then to line 8a on his Form 1040.

    The amount of his self-employment tax from Schedule C-EZ will flow to Schedule 2 line 4 to line 15 on Form 1040. He will put his income tax amount on line 12a of Form 1040.

    Looks like he will need to fill out:
    Form 1040
    Schedule 1
    Schedule 2
    Schedule C-EZ
    Schedule SE

    Hopefully, someone will point out any errors or you can double-check by looking at the forms. I always use tax software so never really look at forms but they are available on the IRS website with a quick search.

    The good news is he is building social security credits.The bad news is he has a tax bill due in April 2020 if he hasn’t been making estimated payments during the year…which he probably needs to do in 2020.

    #5038
    todd
    Participant

    Thank you so much Florida. Very helpful!

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