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Whether you’re an in-home caregiver, health aide or companion, when it comes to senior caregiving, taxes are generally part of the deal. And if you’re hired directly, in most cases, the IRS considers you a household employee.
“That means your employer handles payroll taxes and withholds Social Security and Medicare taxes — and you need to pay your share too,” explains Paul Miller, managing partner and CPA at Miller & Co. in New York City. “If you’re truly an independent contractor, you’ll handle your own taxes. But the IRS really looks closely at classification — so everyone needs to be very careful.”
Aren’t completely clear on what your tax obligations are as a senior caregiver? Here’s what to know, according to experts.
Key takeaways
- Your payroll tax obligations depend on whether you’re classified as an employee or contractor.
- Senior caregivers earning over $2,700 a year are generally considered household employees.
- In most situations, employers handle part of the taxes, but caregivers are responsible for their share and should keep careful records.
What are payroll taxes?
Payroll taxes are taxes paid on the salaries of employees. The main ones you’ll pay are taxes toward retirement (Social Security) and health coverage (Medicare), according to Xavier Epps, a finance expert and owner and operator of FinanceGuysX in Washington D.C.
“On top of that, employers are often responsible for federal and state unemployment taxes, depending on the state,” he continues. “Each plays a different role in funding essential programs, so understanding them is key.” (In some locations, Epps notes, employees may be required to handle state and federal taxes.)
The Department of Labor (DOL) has a list of contacts for state unemployment insurance tax information and assistance.
What are the general tax rules for in-home senior caregivers?
If you’re working part- or full-time as a senior caregiver, you’re almost guaranteed to owe taxes.
Once you’re paid above a certain yearly threshold — it’s $2,800 for 2025 — you step into the role of household employee, explains Epps (more on this shortly). “If you’re paid above this amount, your employer is responsible for Social Security, Medicare and unemployment taxes,” he adds. (It should be noted that you’re responsible for these contributions, as well.)
With this set-up, credits for Social Security and Medicare are available to caregivers.
“If your schedule has been set for you and you’re directed how to carry out your work, you’re an employee. On the flip side, if you manage your workflow, that leans more toward contractor territory.”
— Xavier Epps, finance expert and owner, FinanceGuysX
Are senior caregivers exempt from payroll taxes?
Generally, no, senior caregivers are not exempt, says Miller.
“Senior caregivers are subject to payroll taxes just like any other household employee if they meet the earnings thresholds set by the IRS,” he explains. “There are some narrow exceptions — for example, certain family relationships or very low wages — but most of the time, payroll taxes will apply.”
Important note: If you’re being paid by a family member to provide care, you do still need to pay taxes.
Read more:
Household employee vs. independent contractor: What’s the difference?
Ultimately, it’s about who calls the shots, Epps says.
“If your schedule has been set for you and you’re directed how to carry out your work, you’re an employee,” he explains. “On the flip side, if you manage your workflow, that leans more toward contractor territory.” (Think: You set your own schedule, provide any necessary equipment and provide care on an as-needed basis.)
As a senior caregiver, you’re almost always a household employee — which, in addition to schedule and job scope, affects your taxes. Instead of filing a 1099, you’ll file a W-2. Further, independent contractors ultimately pay more in taxes than household employees, as they’re responsible for things like Social Security and Medicare taxes.
Read more:
Expert tips for navigating taxes as a senior caregiver
Both Epps and Miller agree that the single most important thing you can do as a senior caregiver when it comes to taxes is stay organized. “Be sure to track all your income and expenses carefully,” says Miller.
“Don’t ever be afraid to ask questions. Tax rules can be confusing, and getting help early can save you a lot of stress later on.”
— Paul Miller, managing partner and CPA, Miller & Co.
Here’s what else you can do:
Make sure you have the right form. “If you’re an employee, make sure you’re getting a W-2 at the end of the year,” says Miller. “If you’re working as an independent contractor, you’ll need a 1099 and will probably need to pay estimated taxes quarterly.”
Ask questions. “Don’t ever be afraid to ask questions,” continues Miller. “Tax rules can be confusing, and getting help early can save you a lot of stress later on.”
A final note on payroll taxes and senior caregivers
While most senior caregivers are considered household employees and have the same tax situations as employees in other fields, it’s still important to do some research on the front-end so you’re sure what your obligations are as either an employee or independent contractor.
“Understanding if you’re classified as an employee or independent contractor is crucial come tax time,” says Epps. “Don’t wait — researching or consulting a tax pro early can help avoid surprises in the long run.”
