IRS Excludes Medicaid Waiver Payments from Gross Income Taxpayers can receive payments under a state Medicaid waiver program for providing nonmedical care in their homes to eligible individuals. Thus, taxpayers can exclude these payments from their gross income.

What is a medical waiver payment?

​​​​​​​​Medi-Cal Waivers​ Medi-Cal waivers are programs that provide additional services to specific groups of individuals, limit services to specific geographic areas of the state, and provide medical coverage to individuals who may not otherwise be eligible under traditional Medicaid rules.

What is a 1915c waiver?

The Medicaid Home- and Community-Based Services (HCBS) waiver program was authorized under Section 1915(c) of the Social Security Act. Under a waiver program, a state can waive certain Medicaid program requirements, allowing the state to provide care for people who might not otherwise be eligible under Medicaid.

What do you need to know about Medicaid waivers?

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).

Can you exclude payments from a Medicaid waiver?

Yes. You may exclude the entire payment that you receive under the state Medicaid waiver program for the care of the disabled individual in your home even though the individual is required to pay the administrator part of the cost of the care.

What is a Medicaid home and Community Based Services Waiver?

One such program is Medicaid Home and Community Based Services – a Medicaid waiver that helps people stay in their home instead of receiving care in a nursing home or other institution. But Medicaid and its waiver programs can be difficult to understand, and applying for coverage can be a confusing process for many to navigate.

Do you get earned income credit for Medicaid waiver?

These Medicaid waiver payments are also not considered earned income for the purposes of the Earned Income Credit. To enter Medicaid Waiver Payments for payments made to the taxpayer on a W-2, enter the W-2 by following the steps below: