How exempt income under Notice 2014-7 is reported for Health Insurance Marketplace

[oksana72]

Hello,

I  am eligible for Difficulty of care Exclusions, it's active with the payroll company. My W-2 has no federal wages listed or taxed. But state taxes are withheld and reported. These payments are not the true definition of earned income also because it doesn't count towards social security, medicare --  basically its reimbursement from Medicaid for the care of a medically fragile individual at home vs facility. No paid vacation, no health insurance, or other benefits. Now, I have to buy a health insurance policy on a marketplace through the state of NJ. My federal income is zero, yet state wages are reported in full. If this income is exempt, then is my income is zero for Fed and the State? The cost of health insurance is determined by MAGI. I hope I am asking the right question, is exempt federal income counts or not towards MAGI? 

Thank you!

[Cynthiad66]

By excluding these payments from gross income, difficulty of care payments essentially become tax free income. Excluding these payments lowers MAGI for the care provider's household and therefore affects eligibility for Medicaid, CHIP, or Marketplace subsidies determined under MAGI.

Individual Providers are eligible for the Difficulty of Care income exclusion if the Provider lives with the DSHS client in the same household. This means that the wages earned by an IP for providing personal care to a DSHS client who they live with are excluded from the IP's income for income tax purposes.