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 for this care may qualify to exclude certain Medicaid waiver payments from their gross income calculation.

IRS Notice 2014-7 offers guidance on how these payments are treated for federal income tax purposes. Specifically, it addresses payments made to individual care providers 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) allows individuals who would otherwise need care in a hospital, nursing facility, or intermediate care facility to receive care in the home of the individual provider. The notice clarifies that the IRS considers these Medicaid waiver payments as difficulty of care payments, which are excludable from gross income under ยง 131 of the Internal Revenue Code.

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