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Money December 2013

Dollar Sense

Getting Paid to Be Your Parents’ Caregiver

By Teresa Ambord

Do you pay at least half of your parent’s yearly expenses? If so and his or her income – apart from Social Security – is less than $3,900 in 2013 (or $3,950 in 2014), he or she may qualify as your dependent. That will reduce your taxable income by $3,900 in 2013.

If you are the caregiver for one or both of your elderly parents, you may be in a precarious position. You love them and would do anything for them, but at the same time you see your finances draining away. Maybe you are even unable to work because of your caregiving responsibilities. Depending on the circumstances, you may qualify to be a paid caregiver for your parents, or at least get some hefty tax breaks.

Here are some ideas, based on information from Jim Miller, the author of The Savvy Senior, and Juggling Work and Caregiving, by Amy Goyer (free download available at Amazon.com)

 

Assistance from Your State

First, says Miller, there is a possibility of state assistance. Using the example of your elderly dad, is he low-income and is he eligible for Medicaid? If so, 15 states have programs through Medicaid called Cash for Counseling. These programs provide a small cash allowance for services, including pay a family member for providing caregiving. Other states also have programs which do not require the recipient to be Medicaid eligible. To find out what your state offers: contact your local Medicaid office to find out more, or check cashandcounseling.org. This website displays a map of the states, which you can click on to find more information about resources.

 

Is Your Parent a Veteran or Surviving Spouse of a Veteran?

Some areas across the U.S. have programs for veterans, known as Veteran-Directed Home and Community Based Services. Veterans who need care may qualify for this program and be able to hire their own caregivers, as opposed to going into a nursing home. For wartime veterans and their spouses there is the Veterans Aid and Attendance and Housebound benefits program, which pays for in-home care, assisted living, and nursing home care. These benefits can be used to pay family caregivers.

To be eligible for this program, an applicant must need help performing some daily living tasks, such as bathing, dressing, or using the bathroom. Also there are income requirements. Let’s say your mother is the surviving spouse of a wartime veteran. Her income must be less than $13,362 (minus medical and long-term care expenses). If your mom herself is a single veteran, her income must be below $20,795. And her assets must be below $80,000 (not counting her home and car).

Learn more about this program by calling 800-827-1000 or logging onto va.gov/geriatrics. Or contact your local VA office.

 

Family Payments

Turning to your family may make you uncomfortable. But if you are the one who is putting his/her life on hold to care for your parents, siblings should be willing to help. If your parent doesn’t qualify for help from the government or if you don’t qualify for tax breaks (see below), it may be time to have a sit down with family members.

It could be that the parents you are caregiving will be able to pay you out of their own resources. If so, Jim Miller says it is important to have your family attorney write up a simple contract. This accomplishes a few objectives.

  • It lets your parents know what is expected. Sometimes parents agree to help their caregiver/children but they forget or think there is plenty of time, or feel awkward, and the end result is, no money ever changes hands. Putting it in writing establishes that you are there for them, but you need some financial help.
  • It lets other family members know what the agreement is, so there is less chance of misunderstanding, and a better chance that payments will be made.
  • According to Miller, if your elderly parents later need to apply for Medicaid in order to enter a nursing home, having a written contract in place will add clarity to your parent’s financial situation and help avoid problems.

If your parent does not have resources, you may need to approach your siblings and ask them to pitch in. If it is necessary to hire someone to come in and help, the cost will likely run from $12 to $25 an hour, says Miller. Whether your parent pays you or the siblings help or a combination of both, they are getting a bargain.

 

Insurance for Long-Term Care

Does your parent have long term care coverage? If so, check to see if it allows for in-home care. Those benefits may be payable to you.

 

Tax Breaks

Do you pay at least half of your parent’s yearly expenses? If so and his or her income – apart from Social Security – is less than $3,900 in 2013 (or $3,950 in 2014), he or she may qualify as your dependent. That will reduce your taxable income by $3,900 in 2013.

If you cannot claim your parent as a dependent but you do pay at least half of the parent’s living expense (including long term care costs and medical expenses), you may still be able to get a tax break by adding his or her medical expenses to yours. In 2013 and 2014, those expenses must exceed 10% of your adjusted gross income (or 7.5% if you or your spouse are at least 65 years old, that is, until 2017 when it rises to 10% for everyone).

Ask your tax accountant, or call the IRS help line at 800-829-1040 for more information. You may be able to find help in IRS publication 502.

If you are already serving as a caregiver, you already know that though it may be a labor of love, it is far from easy. You can call a Caregiving Support Line at 877-333-5885 to find out what resources and services may be there to help you, on a local and national basis.

 

Working for the Folks

If you do arrange to be paid for taking care of your parents or other loved ones, remember the point listed above, about establishing a written agreement. This may seem too formal for a family agreement, but for the reasons mentioned under “family payments,” it will protect you and your loved ones in the end.

  • The agreement should outline your duties, responsibilities, payment, and time off, says Goyer in her book. Include as much detail as possible. Then get the parent you are providing care for to sign and date it, and if possible, get a witness to also sign and date the agreement.
  • Remember, receiving payment for this work makes you a self-employed person, and you will need to pay taxes on the amounts you are paid. This is not complicated, but ask your tax adviser how to proceed.
  • If you are working a regular job and you need to take a leave of absence to care for your family member, talk to your employer about a leave of absence. Your employer is under no obligation to pay you for this time off, but if you qualify, your job will be protected for a period of time, under the Family Medical Leave Act.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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