Senior caregiver payroll: legal pay 2026

Your parent needs help at home. Maybe it's a few hours a day, maybe it's full-time care. You found a wonderful caregiver, and now you're wondering about the tax side of things.

The good news: the rules are straightforward, and you're not the first family to navigate this. (For a quick overview, see our caregiver taxes guide.)

Are Senior Caregivers Household Employees?

Yes. The IRS treats senior caregivers exactly the same as nannies, housekeepers, and other household workers. If you hire someone to provide care in your home (or your parent's home) and you control when and how they work, they're your employee.

This includes:

• Home health aides who assist with daily activities
• Personal care assistants who help with bathing, dressing, meals
• Senior companions who provide supervision and social interaction
• Live-in caregivers who reside in the home
• Night nurses or overnight care providers

The exception: If you hire through an agency that employs the caregiver directly, the agency is the employer, not you. But if you find a caregiver on your own (through Care.com, a referral, or word of mouth), you're almost certainly the employer.

When Do You Owe Taxes?

Social Security and Medicare generally apply when you pay one nonexempt caregiver $3,000 or more in a calendar year (2026 threshold). FUTA uses a separate $1,000 aggregate-household-wages test per quarter, and family or state rules can change the result.

That number gets reached quickly with senior care. Here's how fast it adds up:

The reality: Almost every regular senior care arrangement crosses the $3,000 FICA threshold quickly. Check family-worker exceptions plus the separate FUTA and state tests before deciding exactly what is due.

Use our household employer calculator to get the exact numbers for your state.

What Taxes Do You Owe?

The tax obligations are identical to any household employer. Here's the breakdown:

Employer taxes (you pay these on top of wages)

Employee taxes (you withhold from their paycheck)

A real example

Say you hire a part-time home health aide in Texas at $20/hour, 25 hours per week ($26,000/year):

That's about $43.73/week in employer taxes on top of the $500/week wage, roughly 8.7% of wages.

Staying on top of payroll also matters if your parent receives Medicaid or may need it in the future. Properly documented caregiver payments keep the financial picture clean for eligibility reviews. And if the care qualifies as medical, you may be able to deduct those wages on your taxes.

How to Set Up Caregiver Payroll: Step by Step

Setting up caregiver payroll takes about an afternoon. The seven steps below run from getting an EIN to filing at year-end, and only the last three repeat.

1. Get an EIN (5 minutes)

Apply for a free Employer Identification Number at irs.gov/ein. You'll get it immediately. Our EIN guide walks through every screen.

2. Have the caregiver complete a W-4 and I-9

The W-4 determines federal income tax withholding. The I-9 verifies their eligibility to work in the U.S. Both are required before their first day.

3. Check your state requirements

Many states require additional registration, state income tax withholding, or disability insurance for household employers. Find your state's requirements →

4. Decide on pay frequency

Most families pay senior caregivers weekly or biweekly. Whatever you choose, be consistent, and keep records of every payment.

5. Run payroll each pay period

Calculate gross pay, withhold employee taxes, and track everything. NannyKeeper automates the calculations for $10/month.

6. Make quarterly estimated tax payments

Submit payments to the IRS (and your state) four times a year. Deadlines: January 15, April 15, June 15, September 15. See our quarterly deadline guide.

7. File year-end documents

By January 31, or the next business day: Give your caregiver a W-2. By April 15: File Schedule H with your personal Form 1040.

What About Medicaid-Funded Caregivers?

If your parent receives Medicaid benefits and uses a home care program (like a Consumer Directed Personal Assistance Program), the rules are different. In many states, the fiscal intermediary handles payroll and taxes. Check with your state's Medicaid office.

However, if you're hiring and paying a caregiver out of pocket, you're the employer regardless of whether your parent also receives Medicaid benefits for other services.

What If a Family Member Is the Caregiver?

The IRS has specific rules for family caregivers (see our full family member tax exemptions guide for details):

• Your spouse caring for your parent: Exempt from FICA taxes, but wages are still reportable income
• Your child under 21 caring for your parent: Exempt from FICA taxes
• Your parent caring for your child: Generally exempt from both FICA and FUTA, but if you're a single parent (divorced, widowed, or with a spouse who can't provide care) and have a child under 18, Social Security and Medicare apply (FUTA stays exempt)
• Any other relative (sibling, adult child, etc.): Normal employment tax rules apply

Important: Even if FICA is exempt, the caregiver may still owe income taxes on the wages. Consult a tax professional for family caregiver situations.

Senior Care vs. Nanny: Key Differences

The tax rules are identical, but there are a few practical differences:

Important tax benefit: If your parent's caregiver provides medical services (not just companionship), the wages may be deductible as a medical expense on Schedule A. This doesn't apply to nannies. Talk to your tax advisor about whether your situation qualifies.

Which Payroll Service Works for Senior Care?

A payroll service for one senior caregiver costs $100 to $900 a year, and all six below say on their own websites that they cover senior caregivers. The differences show up when care gets more complicated than one caregiver on a fixed schedule, which in senior care it often does: overnight shifts, a live-in arrangement, or two or three aides splitting the week.

Each company's published price for one employee, read on its own website on October 5, 2026, before any introductory offer. The last column is each company's own description of its service, not our rating of it.

The other five file for you; NannyKeeper doesn't. They send your quarterly returns and pay the taxes for you, and four of them include the year-end W-2 and Schedule H; GTM sells year-end forms as a separate optional service without a published price. We do the payroll math, prepare the W-2 and Schedule H, and remind you before each deadline, and you send the returns and payments yourself. With regular care costing $9,360 to $91,000 a year in the examples above, a $468 to $900 fee is small next to the wages, and plenty of families are glad to pay it so the forms are never their job.

Set the account up in the employer's name. If your parent hires and pays the caregiver, your parent is the employer, so the payroll account and the EIN are in their name, even if you're the one logging in to run payroll (see the FAQ below on who the employer is).

For the same companies side by side on features, see our payroll services comparison and the best nanny payroll services guide.

Can You Deduct Caregiver Costs?

Maybe. There are two potential tax benefits:

Medical expense deduction

If the caregiver provides medical care (administering medication, wound care, physical therapy assistance) and your parent qualifies as your dependent, you may deduct the wages as a medical expense on Schedule A. The total must exceed 7.5% of your adjusted gross income.

Dependent care credit

If your parent is your dependent, lives with you, and can't care for themselves, you may qualify for the Dependent Care Tax Credit, on up to $3,000 in qualifying expenses. This is similar to the child care credit.

Read our tax deduction guide for more on how these credits work.

The Cost of Not Paying Taxes

Some families skip the tax paperwork, especially for senior care. Here's what's at stake:

• Back taxes + interest on everything you should have paid
• Failure-to-file penalty up to 25% of unpaid taxes
• Your caregiver loses Social Security credits they've earned, credits that directly affect their retirement benefits
• No workers' compensation coverage if the caregiver is injured on the job
• No unemployment benefits for the caregiver if the arrangement ends

Paying legally protects both you and the person caring for your family. It's the right thing to do, and it's not as hard as you think.

FAQ

Is a home health aide a household employee?

Yes. If you hire a caregiver directly (not through an agency), they're your household employee. You control when and where they work, you set their schedule, and you pay them. That makes you the employer under IRS rules.

What's the difference between hiring through an agency vs. directly?

When you hire through a home care agency, the agency is the employer. They handle payroll, taxes, and insurance. When you hire someone directly (through Care.com, a referral, etc.), you're the employer and responsible for all employment taxes.

Do I need workers' compensation insurance for a caregiver?

It depends on your state. About twenty states require household employers to carry workers' compensation once the caregiver's hours or wages cross a threshold, and a full-time caregiver crosses most of those thresholds quickly. The rest exclude domestic workers from their coverage mandates. Even where it's optional, coverage is worth considering given the physical nature of senior care. Check your state's requirements.

Can I pay a caregiver as an independent contractor?

Almost never. The IRS is clear: if you control when and how the caregiver works, they're an employee. Paying them as a 1099 contractor when they should be a W-2 employee can result in back taxes, penalties, and interest. Read our employee vs. contractor guide.

My parent pays the caregiver. Are they the employer?

The employer is whoever controls the work and pays the wages. If your parent hires the caregiver, sets the schedule, and pays them, your parent is the employer (and needs their own EIN). If you manage everything on your parent's behalf, it gets complicated, so consult a tax professional.

Does paying my caregiver legally affect Medicaid eligibility?

Paying a caregiver on the books doesn't disqualify your parent from Medicaid. In fact, proper payroll records help during Medicaid eligibility reviews because the payments are clearly documented as wages, not gifts or asset transfers. If your parent may need Medicaid in the future, a clean paper trail is especially important during the five-year lookback period.

How much does it cost to put a caregiver on payroll?

Your employer tax cost runs about 8-10% on top of wages (Social Security, Medicare, and unemployment). For a caregiver earning $20/hour at 25 hours per week, that's roughly $2,274/year in employer taxes, or about $44/week. A payroll service adds $100 to $900 a year depending on how much of the filing you hand off; NannyKeeper is $100 a year for the calculations, tax reminders, and W-2. Use our calculator to get your exact numbers.