Taxes

Family Caregiver

The issue of whether or not caregivers, especially family caregivers, are required to pay income tax on compensation received for their services under a Medicaid waiver program comes up frequently. There has been some guidance by the IRS in what is referred to as “difficulty of care” payments but as always, extreme caution should be taken when interpreting IRS documents and knowing which ones are still in effect. We highly recommend you discuss this with a qualified tax accountant or specialist before you take any action.

To see the 2014 IRS Notice concerning this matter, click here (again, caution is urged due to the fact the notice is several years old now and may be outdated). We also highly recommend you check out the IRS website that has some Q&As about “difficulty of care” payments under Medicaid waiver programs and potential tax liability here. Plus, this page from the IRS website will tell you if the original 2014 Notice is still in effect.

Room and Board

There is also the question of whether or not room and board received by family members whose loved one with disabilities lives with them are taxed on that income and therefore should report it to the IRS. There appears to be no easy, definitive answer. As above, we highly recommend you discuss this with a qualified tax accountant or specialist before you take any action. In the meantime, there are two documents from third-party sources that have been cited as potential resources. We do not endorse either article or source but this may help you start your research into this question.

One is an article entitled SSI & Parents Paying Taxes on Rent/Room& Board Portion and the other is Why Should a Parent Charge Their Adult Disabled Child Rent? (SSI and ISM and AZ Guardianship). Please note the second article relates to Arizona and may not be applicable to Colorado. In both instances you should ask a qualified tax specialist about your particular situation and if these articles apply.