Medicaid Waiver and W2 Entry

Forum|Forum|6 months ago
February 18, 2026
5 replies
105 views

My W2 has amount in Box 1 and no code or amount in box 12 (because this Medicaid waiver is new to our agency this year-next year's w-2 will be set up correct). Agency will not issue a 2025 corrected W2. How do I properly exempt the box 1 amount as nontaxable Medicaid waiver (IRS Rule 2014-7). I've tried various ways and have seen it double my taxable income; also seen it not transfer to my Mass. state tax return. Can somebody give simple instructions. TurboTax should have been on this simple fix.

ThomasM125

Level 15

If the amount reported in box 1 is not taxable, then you need to enter it as reported in box 1 when you enter your W-2 form in TurboTax. Then, you will enter a negative amount equal to the non-taxable amount reported in box 1 of your W-2 form as "Other Income", along with a note referencing "Notice 2014-7." The two amounts will cancel each other out so the net amount taxable will be zero.

You can make that adjusting entry in TurboTax as follows:

1. From the Federal menu in TurboTax find Wages and Income

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Reportable Income

5. Enter a description of the adjustment and the amount as a negative number

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

BarbaraLindseyAuthor

Level 2

So I understand I should just enter the W2 amounts as indicated on the W2 but then where in the software do I enter "other Income" as a negative number? Will that transfer over to the state tax program as well? If you know. Thanks