You are correct. The income is not taxed on the Federal income tax return.
The complication is that your tax-exempt Medicaid waiver payments from in-home supportive services (IHSS) may be on a W-2, 1099, or no form at all, depending upon where you live.
How the income is reported in TurboTax depends upon how (or whether) the income was reported to you. See this TurboTax Help.
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