Starting in 2014, certain payments that a taxpayer receives from certain state agencies, the foster care system or Medicaid for caring for someone living in their home under a state's Medicaid waiver program may be excluded from the taxpayer's income as provided in Notice 2014-7.
These Medicaid waiver payments may be excluded from the taxpayer's income whether or not the taxpayer is related to the eligible individual receiving the care. Such payments can be made to a taxpayer on a 1099-Misc or a Form W-2 depending upon the issuing state agency.
Each form has specific filing instructions based on whether you wish to include the income into the Earned Income Credit calculations. For complete reporting instructions, see our KB article.