Notice 2014-7: “provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid Waiver) program, described in this notice, are difficulty of care payments excludable under § 131 of the Internal Revenue Code.
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This income is excludable on your return and cannot be used to calculate Earned Income Credit. Because of this, it cannot simply be deducted on line 21 of the tax return. Please review the following information to determine the correct way to report this income on your tax return.
- Enter your W-2 into the program. Scroll down to box 14. You will see a Medicaid Waiver box. Enter the amount listed in Box 1. This will be deducted from the taxable income. This amount will also be deducted from the EIC Calculation.
- If your W-2 has no amount listed in box 1, you may need to add the amount and then subtract it as indicated above.