Caretakers may exclude certain Medicaid waiver payments from income

Family members who care for a disabled relative in their shared home, and receive Medicaid payments to provide that care, may qualify for an exclusion of certain Medicaid waiver payments on their gross income calculation.

IRS Notice 2014-7 provides guidance on the federal income tax treatment of certain payments to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in section 1915(c) of the Social Security Act (Medicaid Waiver payments).

Section 1915(c) enables individuals who otherwise would require care in a hospital, nursing facility, or intermediate care facility to receive care in the individual care provider’s home. The notice provides that the Service will treat these Medicaid waiver payments as difficulty of care payments excludable from gross income under § 131 of the Internal Revenue Code.

For more information about specific situations, consult the IRS guidance or contact a ShindelRock tax professional.