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Dr. Pat Pachciarz® Clarity · Tax strategy and tax filing

Do I owe taxes if I pay my daughter to care for me (or Mom)?

Your daughter is already doing the care. Paying her feels fair. Then someone asks whether that makes you an employer.

Home base: Aurora, Illinois · Serving clients in person in Aurora and virtually · 815-486-0722

Written and reviewed by Dr. Pat Pachciarz® · Updated October 10, 2026 · Educational, not individual legal, tax or investment advice. Illinois law as of October 2026.

The short answer

Often, yes. If you pay an adult child $3,000 or more in cash wages in 2026 to care for you, you're likely a household employer. The IRS treats a worker as your household employee when you control not only what work is done but how it's done, and it lists caretakers and health aides as household workers (IRS Publication 926). Once cash wages to that person reach $3,000 in 2026, Social Security and Medicare taxes apply: 7.65% from the worker's share and 7.65% from yours. If you pay household employees $1,000 or more in any calendar quarter, federal unemployment (FUTA) tax applies too: 6% of the first $7,000 of each employee's wages. Some family members don't count: wages you pay your spouse, your child under 21 or your parent generally aren't Social Security, Medicare or FUTA wages. You report it all on Schedule H with your tax return. When it's Mom paying your sibling, the same rules apply with Mom as the employer. A CPA should confirm who the employer is before the first payment.

One caregiving daughter on an online forum asked whether she could be paid for her caregiving out of the trust her parents set up for their care. It's a fair question, and the tax side is the part families most often skip.

Why does this matter?

  • The taxes add up. On $20,800 a year in wages, the employer's share alone is about $1,591 (IRS Publication 926).
  • Records protect everyone. Payroll records show exactly what was paid and when, which protects the caregiver and answers siblings' questions.
  • Some of it may be deductible. Employment taxes you pay for an attendant who provides medical care can count as a medical expense, but only the part tied to medical services (IRS Publication 502).
  • Unreported pay causes problems later. Back taxes, penalties, and siblings asking where the money went.

How do I figure out what applies to us?

  1. Who controls the work? If you (or Mom) decide what gets done and how, the caregiver is likely a household employee. If an agency provides and directs the worker, the worker isn't yours (IRS Publication 926).
  2. Who is the caregiver to the person paying? Spouse, child under 21 or parent: those wages generally don't count. An adult child, a niece or a friend: they generally do.
  3. How much, and when? Track cash wages for the year ($3,000 threshold in 2026) and by quarter ($1,000 FUTA threshold).
  4. Income tax withholding is optional. You're not required to withhold federal income tax unless the employee asks and you agree, using Form W-4 (IRS Publication 926).
  5. Plan the paperwork. Schedule H with your Form 1040, a Form W-2 for the caregiver, and state employment taxes where they apply. Your CPA sets this up.

Who needs to be in the room?

The parent pays, the caregiver works, the CPA sees it in April, and the other siblings wonder. Nobody owns the whole picture.

  • CPA: confirms who the employer is, sets up payroll and files Schedule H.
  • Illinois estate attorney: drafts a written caregiver agreement, especially if a trust or power of attorney agent is paying.
  • Financial coordinator: fits the wages and taxes into the care budget every sibling can see.

How does DAITT® help with this?

  1. Tax Strategy and Tax Filing

    Set up caregiver pay correctly with your CPA, so nobody gets a surprise at tax time.

  2. Advanced Planning

    Build the wages and employer taxes into the long-term care budget.

  3. Trust Planning

    If a trust is paying, line up the caregiver agreement with the trust's terms.

Related: when the trustee won't pay the family caregiver.

What does this look like with real numbers?

An illustration, not a client story. Say Mom pays her 45-year-old daughter $20 an hour for 20 hours a week, all 52 weeks of 2026. That's $20,800 in cash wages, or $5,200 a quarter. Here's the household employer math using the 2026 figures in IRS Publication 926:

  • Social Security and Medicare: $20,800 is over the $3,000 cash-wage threshold for 2026, so both apply. About $1,591 (7.65%) comes out of the daughter's pay, and Mom pays a matching $1,591 (7.65%).
  • Federal unemployment (FUTA): $5,200 a quarter is over the $1,000-per-quarter threshold, so FUTA applies to the first $7,000 of her wages. That's $420 at 6%, or as little as $42 if Mom earns the full 5.4% credit for state unemployment tax paid on time. Mom pays FUTA herself; it isn't withheld from her daughter.
  • Income tax: the $20,800 is taxable income to the daughter, reported on the W-2 Mom gives her. Mom doesn't have to withhold income tax unless her daughter asks and Mom agrees.
  • Paperwork: Mom files Schedule H with her 2026 return by April 15, 2027.

Family exceptions. Wages a parent pays her own child under 21 don't count for Social Security, Medicare or FUTA. That's why the 45-year-old daughter's wages do count. If the helper were Mom's 19-year-old grandchild, the exception wouldn't apply either, because a grandchild isn't Mom's child. Wages you pay your own parent generally don't count, unless your parent cares for your child under 18 (or a child who needs an adult's care) and you're divorced and not remarried, widowed, or married to a spouse who can't provide that care. Even when family wages are exempt from these taxes, they're still subject to federal income tax (IRS Publication 926).

What should I do this week?

  1. Write down who's paying whom, how much, and since when.
  2. Decide who controls the work: you, Mom, or an agency.
  3. Ask a CPA to confirm the employer and set up payroll before the next payment.
  4. Put the arrangement in a short written caregiver agreement.
  5. Share one monthly summary with every sibling.

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Related questions

Do I have to pay Social Security and Medicare tax if I pay my adult daughter to care for me?

Often, yes. If she's your household employee and you pay her $3,000 or more in cash wages in 2026, Social Security and Medicare taxes apply: 7.65% from her share and 7.65% from yours (IRS Publication 926). Wages to your own child under 21 don't count.

Which family members are exempt from household employment taxes?

Wages you pay your spouse, your child under 21 or your parent generally don't count as Social Security, Medicare or FUTA wages. There's a narrow exception for a parent who cares for your young child in certain situations (IRS Publication 926).

Is a caregiver hired through an agency my employee?

Not if the agency provides the worker and controls what work is done and how it's done. Then the agency handles the payroll taxes. If you control the work, the worker can be your household employee (IRS Publication 926).

Sources

Who is Dr. Pat Pachciarz®?

Dr. Pat Pachciarz® is the Founder & CEO of The Pinnacle Group in Aurora, Illinois, and creator of the DAITT® Advisory Method. He is highly focused on the human connection in financial planning: how behavior and emotion shape money decisions. That focus is grounded in the Accredited Behavioral Finance Professional (ABFP®) designation he is pursuing. He is currently earning his Doctorate in Organizational Leadership at the University of St. Francis while simultaneously earning his Master's in Personal Financial Planning at the College for Financial Planning. A Certified Exit Planning Advisor (CEPA®), he coordinates each client's banker, CPA, attorneys and advisors into one clear plan.

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Also see drpat.co, running your trust in Illinois and Trust & Estate Planning at The Pinnacle Group®.

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