IHSS -In Home Support Services payments to a spouse to care for a spouse

[Dodgerfan]

A taxpayer cares for his spouse at home. He is paid $17,147 in 2023 by the State of California through the IHSS  (In Home Support Services program for her care. Is this payment taxable by the IRS or the State of California?

[TitoBonsai]

No to both federal and CA.

If your client received Form W-2, complete Screen 10, then go to Screen 14.1 "SS Benefits, Alimony, Miscellaneous Inc." and enter the amount on the line "Nontaxable medicaid waiver payments to care provider that were incorrectly reported on W-2 Box 1."  Press F1 key for more information.

If your client did not receive Form W-2, consider entering the nontaxable amount on the line "Nontaxable medicaid waiver payments to care provider that were not reported on W-2 Box 1."  Press F1 key for more information.

[strong silence]

@TitoBonsai 

Hi TB

Same question but the TP doesn't care for her spouse. She cares for her parents.  Are the wages taxable?

[TitoBonsai]

The Medicaid waiver payments are payments under a Medicaid waiver program to an individual care provider who performs certain services, such as meal preparation, laundry, and personal care services, for an eligible person, enabling this individual who otherwise would require care in a hospital or nursing facility to receive care in the care provider's home.

So, it is important to point out that (1) the provider must live with the service recipient in the same household (see IRS Notice 2014-7), and (2) the services must be authorized through a Medicaid Home and Community-Based Services Waiver program administered by either a state or a certified Medicaid provider.

[Strongsilence-CPA]

thank you.

I treated them as nontaxable for Fed. (I added the wage then backed them out on Schedule 1 with the description of "IRS Section 131, Notice 2014-7")