Difficulty of Care NY

Does NYS recognize Difficulty of Care IRS 2014-7 payment exemption? I successfully entered my W-2 with the amount in box 1 and the entered the credit in Other Income to offset it, but does that flow into the NYS return or do I need to add that income back in? I've seen conflicting info on whether NYS exempts the income as well. If they don't then how/where do I add it back in on the NYS return. I saw a reference to IT-225 but can't see how to do that through the steps.

Thanks for any help you can offer. This is not a well-documented subject but has a huge impact on a person's return.

2553

1 Best answer

Expert Alumni

Feb 5, 2026 4:48:45 PM

No, Difficulty of Care is no longer entered that way.

Years ago there needed to be a "correcting entry" to offset the amount, but that is no longer needed.

Enter the W-2 the way it was reported,
On the screen that follows that says
"Let's check for other situations"
SELECT "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments"

That's all you need to do for that income.

Expert Alumni

Feb 5, 2026 4:48:45 PM

No, Difficulty of Care is no longer entered that way.

Years ago there needed to be a "correcting entry" to offset the amount, but that is no longer needed.

Enter the W-2 the way it was reported,
On the screen that follows that says
"Let's check for other situations"
SELECT "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments"

That's all you need to do for that income.

Returning Member

Feb 5, 2026 5:44:20 PM

Thank you very much for that. I am very thankful to have had an expert respond so quickly.

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Difficulty of Care NY