How Do Taxes Work for Paid Caregivers in Virginia?

The IRS will treat this as regular employment income. But whether you owe federal income tax depends on your situation, and there is an important tax advantage for caregivers who live in the same home as the person they're caring for.

Are Paid Caregivers Treated Like Employees?

Yes. When you are paid through Virginia Medicaid's in-home care program, your pay goes through a state-approved payroll company. That company:

• Tracks your hours
• Pays you on a set schedule
• Handles the tax reporting
• Sends you a W-2

This income is not considered self-employed income.

Do I Have to Pay Federal Income Tax?

It depends on whether you live with the person you care for.

If you live in the same home, your caregiver pay is often not counted as taxable income for federal income tax purposes. This is a special IRS rule for live-in caregivers.

If you do not live with the person, your pay is usually taxed like a regular job.

Even if your income is not taxed for federal income tax purposes, you will still see:

• Social Security tax (6.2%)
• Medicare tax (1.45%)

What About Virginia State Income Tax?

If your caregiver income is excluded from federal income tax under the live-in caregiver rule, it may also be excluded from Virginia income tax. Because every situation is different, many caregivers check with a tax professional to be sure.

Will I Get a W-2?

Yes. Even if your income ends up not being taxable under the live-in caregiver rule, you may still receive a W-2 for tax reporting purposes.

Do I Still Have to File Taxes?

In most cases, yes. Even if you do not owe federal income tax, you may still need to file a tax return to report your income properly. If this is your only income, you may owe little or nothing.

Quick Summary

• You receive a W-2 for this income which you will need to include in your tax filing
• If you live with the person you care for, the income may not be federally taxable (but still must be reported)
• If you do not live together, your income is usually taxed like a regular job

The payroll process works like a regular job, but there is a special tax advantage for live-in caregivers.