Resource Center — Caregivers
Medicaid waiver caregiver
tax help.
If a state Medicaid waiver program pays you to care for someone who lives in your home, you may qualify for tax benefits that many people do not know about.
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Benefits
What waiver caregivers may qualify for.
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Your payments may be tax-free
Qualified Medicaid waiver payments for care you give in your own home, where the person in your care also lives, can be excluded from your income under IRS Notice 2014-7.
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Refunds for past years
If you paid tax on payments that qualify, you may be able to amend your returns for open years, usually the last three, and claim a refund.
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Bigger tax credits
You can choose to count the payments as earned income for the Earned Income Tax Credit and the refundable Child Tax Credit. For many families, this makes both credits larger.
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Retirement savings
The SECURE Act lets these payments count as pay for nondeductible IRA contributions and for contributions to your employer’s retirement plan, even when the payments are tax-free.
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Self-employment tax
The IRS says excludable waiver payments are not self-employment income. If you paid self-employment tax on payments that qualify, ask us if you can get it back.
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Lower income for other programs
Excluded payments lower your adjusted gross income. This can affect income-based benefits such as the Premium Tax Credit for marketplace health insurance.
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State tax
Nebraska starts its income tax from federal adjusted gross income, and Iowa starts from federal taxable income. In both states, the federal exclusion usually lowers your state tax too.
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Free prior-year refund review
We review up to three years of your returns at no cost and tell you if a refund is available.
Check in two minutes
Do your payments qualify?
Answer five questions in our free Medicaid Waiver Payment Checker. It also estimates the tax you may save.
Ida Morgan spent more than thirteen years as a home health aide before she became an Enrolled Agent. She knows waiver paperwork from both sides, and she helps caregivers and agencies get these rules right.
Important. Whether these benefits apply depends on your living arrangement, how the agency pays you, and your other income. This page is general information, not tax advice. Sources: IRS Notice 2014-7; IRS questions and answers on Medicaid waiver payments; IRS Notice 2020-68; Feigh v. Commissioner, 152 T.C. No. 15 (2019) and IRS AOD 2020-02; IRC 36B.
Get your free prior-year refund review.
We review up to three years of returns at no cost and tell you if a refund is available.