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Personal Care Agreements: How to Get Paid by a Parent to Provide Care

If your parent has the means to pay you for care, a written agreement turns informal help into documented work. Here's what it covers and where families get tripped up.

By PaidToCare Editorial Team · Published October 15, 2026 · Updated October 15, 2026

A personal care agreement (also called a caregiver agreement or caregiver contract) is a written contract in which a person who needs care, often an older parent, agrees to pay a family member or friend for specific care services. It's one of the four main routes in our guide to getting paid to care for a parent. Unlike Medicaid or VA programs, the money comes from the care recipient, not a government program.

Why put it in writing

The main reason is Medicaid. Under federal law, when someone applies for Medicaid long-term care, the state looks back at transfers of assets made for less than fair market value during the 60 months before the application (42 U.S.C. §1396p(c)). A transfer like that can trigger a period of ineligibility. If a parent has been handing a child money for "helping out" with nothing on paper, those payments can look like gifts. A written agreement, signed before payments begin, with a fair rate and records of the work, is how families show the money paid for services.

Each state applies these rules through its own Medicaid program, and states differ in how they review caregiver agreements (for example, whether they accept payment for care already given, or lump-sum prepayment). We don't know your state's current practice. An elder-law attorney does, and it's worth paying for a review.

A written agreement also helps the rest of the family. It makes clear what the caregiver is doing and what they're paid, which can head off disputes among siblings later.

What a personal care agreement usually includes

• The parties: the person receiving care (or their agent under a power of attorney, if the document allows it) and the caregiver.
• Services: a specific list, for example bathing, meals, medication reminders, transportation to appointments, housekeeping, bill paying.
• Schedule: expected hours per week, and how changes are handled.
• Pay: an hourly or weekly rate, and how and when it's paid. Pay for future services as they're performed, not for past help.
• A fair rate: because the look-back test is about fair market value, keep a note of what local home care agencies or aides charge for similar work, and set the rate at or below that.
• Records: a commitment to keep a dated care log of hours and tasks.
• Term and ending: how either side can end or change the agreement, and what happens if the care recipient moves to a facility.
• Signatures and date: signed before payments start. Some attorneys also recommend notarizing it.

Our $9 template pack includes a personal care agreement template and a daily care log you can bring to an attorney. It's a starting point, not a substitute for legal review.

Taxes: your parent may be a household employer

The IRS treats someone who does work in or around a private home, including caretakers and health aides, as a household employee when the person paying can control what work is done and how it's done. That often describes a family caregiver. Per IRS Publication 926 for 2026:

• If a household employer pays one employee $3,000 or more in cash wages in 2026, Social Security and Medicare taxes apply (7.65% from the employer and 7.65% from the employee).
• There are family exceptions. Wages paid to your spouse, your child under 21, or (with limited exceptions) your parent aren't counted. So a parent paying an adult child 21 or older is generally not covered by the family exception.
• Federal unemployment (FUTA) tax applies if total cash wages to household employees reach $1,000 in a calendar quarter, but wages paid to your spouse, child under 21, or parent aren't counted.
• Household employers generally report these taxes on Schedule H (Form 1040) and give the employee a Form W-2. Pub 926 says to keep employment tax records for at least 4 years.

The caregiver should expect to report the pay as income. A tax professional can confirm how your situation should be set up. If the care recipient can't care for themselves, the IRS child and dependent care credit rules may also be worth asking about.

Step by step

1. Talk as a family. Agree on who provides care, how much, and at what rate. Share the plan with siblings.
2. Check capacity. The person receiving care must be able to sign a contract, or have an agent with authority to sign for them.
3. Look up local rates. Get prices from a few agencies and keep them with the agreement.
4. Draft, then get it reviewed by an elder-law attorney in your state. Find one through NAELA or your Area Agency on Aging (Eldercare Locator, 800-677-1116).
5. Sign before any payment.
6. Pay by check or transfer, not cash, and keep a care log every week.
7. Handle payroll taxes if they apply.
8. Revisit it when care needs change.

When a government program might fit better

If your parent has limited savings or already qualifies for Medicaid, a personal care agreement may not be the right tool. Many states have Medicaid programs that pay family caregivers directly. Check your state guide or take the one-minute quiz. If your parent is a veteran, see our VA caregiver programs page.

Frequently asked questions

What is a personal care agreement?

A written contract in which a person who needs care, often an aging parent, agrees to pay a family member or friend for specific care services at a set rate and schedule. It documents that the payments are for services rather than gifts.

Does a personal care agreement protect Medicaid eligibility?

It can help but isn't a guarantee. Federal law has states review asset transfers made for less than fair market value in the 60 months before a long-term care Medicaid application. A signed agreement with a fair rate and care records helps show payments were for services. States apply these rules differently, so have an elder-law attorney review it.

Can my parent pay me for care I already gave?

Payments for past care are often treated as gifts in Medicaid reviews. Agreements generally cover future services, paid as they are performed. Ask an elder-law attorney how your state treats it.

Do I have to pay taxes if my parent pays me to be their caregiver?

Usually the caregiver reports the pay as income. If the parent controls how the work is done, the IRS may consider them a household employer, and Social Security and Medicare taxes apply once cash wages to one employee reach $3,000 in 2026 (IRS Publication 926). The family exception doesn't cover a child 21 or older paid by a parent.

Does a personal care agreement need to be notarized?

Federal law doesn't set a notarization rule for these agreements. Some attorneys recommend it, and a state may have its own expectations, so ask a local elder-law attorney.

Sources

Last checked October 15, 2026. Found an error? Email [email protected].