No that is not taxable income. You were lucky not to have withholding taken out. Are you in California?
There are a couple ways to enter a W2 for IHSS wages.
1. Enter the W2 as normal wages on line 7.
Then make an entry on 1040 line 21 Other Income to offiset it by going to
Federal Taxes
Wages and Income
Scroll way down to the end - Less Common Income
Click start or update next to the last one "miscellaneous income"
Then the last one for Other Reportable Income
For description enter “Notice 2014-7” . Enter the amount with a minus sign (-) in front of it.
2. Or when you enter the W2 it gives you the EIC credit for it (which would be wrong) see this FAQ
https://ttlc.intuit.com/questions/2635384-qualified-medicaid-waiver-payments-on-a-w-2-show-as-earned... So you either completely exclude the W2 from your return or enter it under Miscellaneous Income. To enter it as Misc Income use the same steps as above and you will make 2 entries.
Your first entry description would be W-2 EIN # (enter EIN number from W-2) Box 1 Medicaid Waiver Payments, and enter the Box 1 amount as a positive number.
Next you click "Add Another Miscellaneous Income Item," and enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number. This both shows and explains removing the W-2 income, placing a zero on Line 21 of your Form 1040.
