Generally, yes — many families do exactly this. But paying a family member, such as an adult child, to provide care usually creates a real employment relationship with real tax obligations, and doing it informally can create real problems later, especially if Medicaid becomes relevant.
The tax reality most families don't expect
If your parent pays you (or another family member) directly for regular caregiving, your parent generally becomes what the IRS calls a "household employer" — the same category as hiring a nanny. Per the IRS, the 2026 threshold is $3,000 in cash wages to any one household employee in a year; cross that, and Social Security and Medicare taxes (FICA) apply to those wages.
Here's the part that surprises people: the IRS does have exemptions for wages paid to certain family members — but they're narrower than most families assume. Wages paid to a spouse, to a child under 21, or to the employer's own parent are generally exempt from some or all of these taxes. But when an aging parent pays their adult child (over 21) to provide care, that specific exemption doesn't apply — this is the most common family caregiving arrangement, and it's generally subject to the standard household employment tax rules like any other hire.
Why a written caregiver agreement matters
Beyond taxes, there's a second reason a formal, written agreement matters: Medicaid. If your family might need Medicaid to help pay for long-term care down the road, informal cash payments to a family caregiver — without a written agreement at fair market value — can be treated as a disqualifying gift during Medicaid's look-back review, even if the care was genuinely provided. See Medicaid & Long-Term Care: A Starting Guide for how the look-back period works.
A proper family caregiver agreement generally documents the specific services provided, the pay rate (at a reasonable, fair-market rate — not inflated), and a regular payment schedule, ideally set up before payments begin.
A note on this page: This is general information, not individualized tax, legal, or Medicaid-planning advice, and it doesn't apply to every situation — exemptions and rules can depend on specific facts this page can't account for. Consult a tax professional and, if Medicaid may become relevant, an elder law attorney before setting up a family caregiver payment arrangement.
Sources & methodology
Reviewed August 2026. Federal tax thresholds are adjusted periodically and Medicaid rules vary by state — always confirm current figures with the sources below or a qualified professional.