Understanding Medicaid Waiver Payments: Are They Taxable Income?

Many families rely on loved ones to provide care at home. When that care involves someone with a disability or chronic condition who receives Medicaid, you might be eligible for medicaid waiver payments. But with the term comes a lot of questions, especially regarding taxes. This blog post dives into the world of medicaid waiver payments, specifically:

• What is a medicaid waiver payment?

• Are medicaid waiver payments considered taxable income?

• How are medicaid waiver payments reported?

• How much can you expect to be paid?

What is a Medicaid Waiver Payment?

Medicaid waiver programs allow states to offer additional services and support to people with disabilities or specific health needs who would otherwise require institutional care. These programs can include providing funds for in-home care, which is where medicaid waiver payments come in.

These payments are essentially reimbursements made to family members who provide care for a loved one enrolled in a Medicaid waiver program. It's important to remember that medicaid waiver payments vary drastically by state.

Are Medicaid Waiver Payments Considered Taxable Income?

This is where things get interesting. Thanks to IRS Notice 2014-7, some medicaid waiver payments might be excluded from your taxable income under the category of "difficulty of care payments." This applies specifically to payments made to caregivers who provide care that would otherwise require a hospital or nursing facility setting (thanks to section 1915(c) of the code).

So, how do you know if your payments are taxable?

The best course of action is to consult with a tax professional. However, the IRS Notice 2014-7 provides some helpful guidelines.

Additionally, for any state that has the Structured Family Caregiver Program such as Indiana, caregivers are treated as independent contractors and that income in non-taxable.

How Much Can You Expect to be Paid?

Since medicaid waiver payments depend on your state, there's no one-size-fits-all answer. However, to give you an idea, let's look at Indiana's Structured Family Care program.

Here, the reimbursement rates for caregivers vary based on the level of care needed (levels 1, 2, and 3), ranging from $77.54 to $133.33. Most agencies in Indiana pass on 50-70% of that amount to the family caregiver.

Finding Out Your Pay Rate

To get a better idea of what you might earn in your state, you can usually find the Medicaid reimbursement rates for home care agencies online. With that information, call nearby agencies that work with your specific program to see what percentage of the reimbursement rate they offer to caregivers.

Want More Information?

Paid.care offers a helpful pay rate calculator and guide for family caregivers: This resource can be a valuable tool in understanding what you might expect to earn as a family caregiver through medicaid waiver payments.

Remember, consulting with a tax professional is always recommended to ensure you're on the right track when it comes to taxes and medicaid waiver payments.