My husband and I receive medicaid waiver payments as caregivers for our adult disabled children. We each receive separate W2 forms, so I understand we qualify for EIC?

[mbreaux]

Even though our payments are taxed, they are considered earned income, so we can claim EIC. (From the Feigh v. Commissioner decision in 2015.) Can we, as the taxpayers, decide the amount of earned income we will claim for the EIC? I read somewhere that we can. (We can claim some, all, or none of it.) Does that sound right to someone who also knows about this? Thanks.

[CatinaT1]

TurboTax can exempt income under Notice 2014-7 per the IRS instructions for Medicaid Waiver payments from IHHS. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments and excludable as income. Additionally, you can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.     

Ensure you entered it according to these instructions: How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax?