MY wife has taken her mother into our house - as she has dementia. She's acting as her sole care giver, how do we report the income?

I think that the POA for her mother needs to give her a 1099 miscellaneous for her to report her income with. I also think you will need to include the contract in the tax return so that this is not viewed as gifting. I think that you need to discuss this with a CPA for they are trained in tax law.

jpstrak, if Congress passes the new tax bill, then it would be up to the CPA's, Accountants, and people who do income taxes on a regular basis, to help you through the maze. What was the norm for last year's income taxes, may not be the norm this year's taxes which are prepare for April 2018.