Q. I am a live-in provider for IHSS. I am tax exempt. Is this income still counted ?
A. Yes and No. It is not subject to income tax, but it does count for the Earned Income Credit.
Because of this dual nature, it can be a little tricky entering it, in TurboTax.
The IRS has provided a place to deduct (line 8s of Schedule 1) the nontaxable income (but still allow you to claim the Earned Income credit based on that income)
Enter you W-2, as received, at the W-2 screen, in TurboTax. At the end of the W-2 screens, you will encounter a screen titled "Let's check for uncommon situations". Check the box at "Non taxable Medicare waiver payments that qualify as difficulty of care payments". On the next screen, indicate the amount (usually "all of it").
Even if you have no W-2, it can be entered in the other income section. The interview allows for medicare waiver identity.
TT support article: https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-w-2/qualified-medicaid-waiver-payme...