Difficulty of Care Wavier Payment taxable in state of Indiana

[Ron Brackin]

difficulty of care of care payments are not taxable for federal income tax as per irs notice 14-007.  

Are these payments taxable as income in the State of Indiana?

[SabrinaD2]

Difficulty of Care Waiver Payments are generally not taxed as income at the federal level, according to IRS guidelines (IRS Notice 2014–7). The Indiana IT-40 form uses the income from the federal return and generally follows IRS guidelines. Since these payments are excludable on the federal return, they are likely not taxable at the state level. However, the Indiana Department of Revenue (DOR) and Indiana Tax Code don't appear to provide specific guidance on this matter.

For more information, you can refer to:

• IRS Notice 2014–7
• Indiana IT-40 Form
• Contact the Indiana DOR directly at 317-232-2240 for further clarification.