If I get paid to be a caregiver, do I have to include my compensation as income on my tax return?
If an adult relative moves in with us, and we are getting paid a certain amount of money from her bank account or something like a living trust I think to take care of her, is that compensation that we need to include as income on our tax return? Basically, we are getting paid instead of a home to take care of her. We have expenses and costs associated with this obviously as well.
Expert Answer
The money you are paid for caring for your relative is taxable income that needs to be included on your tax return. Since you are self-employed, you can report your expenses on Schedule C of your 1040 form. These expenses will offset your self-employment income. People who are self-employed are also required to pay Social Security and Medicare taxes. For 2011 only, these taxes are 13.3% of your gross income from your self-employment. (There is a 2% reduction this year). You also need to check with your state to see what additional taxes they assess