If you provide care for another person (for example, an elderly person with Alzheimer’s) under the supervision of a licensed professional, you’re treated as an employee for federal income tax purposes as long as you are providing the service and maintaining the person while they’re under your care. But you probably aren’t considered an employee for tax purposes if you’re providing the care voluntarily in your spare time and only as a result of another professional agreement with the person (like taking care of a patient).
Also, it’s important to note that whether, under state law, you’re considered to receive “salary” depends on your state’s tax laws, since the amount you receive is dependent on the state in which the work takes place. This means that if you are a nonprofit or a business that provides home care services, the nonprofit won’t be able to deduct the expenses you pay as a salary, but it would be able to deduct your cost of the “care” as a business expense. And if you’re a nonprofit or business that provides professional services such as health care and nursing home care, such as nursing-home managers or home health aides, the employee won’t be able to deduct the cost of the services you provide as a business expense. So what’s the difference between the two situations? Read on!
When you provide “care” for another person under the supervision of a licensed professional, are you considered an employee as long as you are providing the service?
No. This is important because there’s a long-standing distinction between “employee-benefits” (such as health care or retirement insurance) and services provided for a “personal reason.”
For example, let’s say your “employee-benefits” are paid by your union and you provide your own health care to others. You’re only considered an employee if you aren’t also an employee under an agreement between you and the union.
If you’re an employee under state law, your employer would be able to deduct the cost of your services—even if you’re paid by the union only—as a business expense, but it wouldn’t be able to deduct any of the expenses you paid (for example, the cost of health care).
But if you’re an employee under any state’s employment laws, your employer would be able to deduct the costs of your care—not just any and all of the expenses you pay—as a business expense, since they are primarily expenses related to the employer’s business
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