We Provide Care for Our Critically Ill Daughter. Can We Be Compensated for This?

Caregivers often need physical, emotional and financial help.

A reader recently wrote: “Our daughter is on disability and has been for several years. She has been critically ill since June 15, 2014. I have had the full responsibility  of her care her whole life but especially these last few months. We are completely tied down and have been the whole summer. Can I be compensated for the care I give her?”

Our best wishes go out to anyone in this situation. We know providing lifetime care to a family member is not only physically and emotionally draining, it takes a financial toll, too.

Help finding programs and resources
For help finding financial relief, start by consulting city, county, state and federal agencies for the disabled. Don’t overlook hospital outreach programs, religious organizations and support groups for specific disabilities — all of which may be able to put you in touch with caregiving resources in  your community. Also, check with your local Social Security Administration office on eligibility requirements for public benefit programs.

Tax breaks for home caregivers
For additional help, we reached out to CPA Keith Depies of Roberts, Ritschke & Tyczkowski, Ltd., Neenah, Wis. Here’s what he had to say:

Individuals can be compensated for providing care to their critically ill family members. Depending on the requirements of providing care to family members, the compensation may be taxable to the provider. Previously the IRS ruled that compensation payments to a related individual would be taxable income. However, earlier this year the IRS issued Notice 2014-7, which allows individuals who are compensated for providing care to qualified individuals to exclude the compensation received from taxable income, whether or not they are related. There are several requirements to qualify for the exclusion under Code Section 131 of the Internal Revenue Code. The first is that the payments are to be received under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program.

Other important requirements:
  • The difficulty of care payment is required as compensation of the additional care needed because the qualified foster individual has a physical, mental or emotional handicap.
  • The care must be provided in the provider’s home.
  • The state must determine the need for this compensation.
  • The payor must designate the compensation for this purpose. 

A state may obtain a Medicaid waiver, which would allow the cost of home or community-based services to individuals who would otherwise require care in a hospital, nursing home or intermediate care facility. Home services include personal care services such as eating, bathing, dressing, hygiene, medication management and meal preparation. Providing these services in your home are generally more cost effective and are necessary to avoid institutionalization of the patient.

Each states law determine how their program is going to be administered and whether or not family members can be compensated for providing home-based care. The states may also work through an outside agency to certify individuals and Medicaid providers to provide services to eligible individuals. These care programs and the providers are then either approved by and monitored by the state or contracted agency.

The new rulings are effective for qualified payments received after Jan. 3, 2014, but a taxpayer may be able to use this guidance for any qualified payments that were received in previous tax years. Please consult with your tax professional for guidance related to your personal facts and circumstances. More qualifying information and definitions can be found here:  http://www.irs.gov/pub/irs-drop/n-14-07.pdf.

In accordance with applicable professional regulations, please understand that, unless expressly stated otherwise, any written advice contained in, forwarded with, or attached to this notice is not intended or written by Roberts, Ritschke & Tyczkowski, Ltd. to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code. No one, without our express prior written permission, may use or refer to any tax advice in this communication in promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to any other party.

Caring for the caregiver
Remember, you must also care for yourself in order to be an effective caregiver. Consider respite care to give yourself an occasional break. Respite care can be as informal as an agreement with other family members or friends, or a formal contract for services with an agency.

If you haven’t already, visit our Caregiver Resource Library for more than 1,500 links to government organizations, health care services, financial resources and more. And here are articles that may offer additional help:

About The CareGiver Partnership. The CareGiver Partnership helps caregivers and their
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loved ones with answers to their caregiving questions, including information about home health care products and supplies, from our Wisconsin-based team of Product Specialists who are all current or former caregivers. The company’s Web site provides the largest online library of resources on subjects most important to caregivers — from arthritis to assisted living, and Parkinson’s to prostate cancer — as well as access to more than 3,000 home care products for incontinence, skin care, mobility, home safety and daily living aids. The CareGiver Partnership was founded in 2004 by Lynn Wilson of Neenah, Wis. Visit http://www.caregiverpartnership.com to learn more or call 1-800-985-1353. Help support this ad-free blog by answering several questions about caregiving
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