How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax?

If your W-2 includes an amount in Box 1 and Box 12 for tax-exempt Medicare waiver payments from In-Home Supportive Services (IHSS), you should request a corrected W-2 as your payments should only be reflected in Box 12.

If you can't get a corrected W-2, follow these instructions:

1. Open or continue your return.
2. Navigate to the W-2 section:
   • TurboTax Online/Mobile: Go to W-2.
   • TurboTax Desktop: Search for W-2 and select the Jump to link.
3. Enter all your W-2 info in the appropriate boxes in TurboTax as they're shown on your form, except leave Boxes 1 through 8 blank.
4. TurboTax will include the amount you entered in Box 12 as income on Line 1d of your Form 1040 and will subtract the amount on Line 8. This means you won’t be taxed on these wages on Form 1040.

• If the only entry on your W-2 is in Box 12 (there's a blank or a $0 in Box 1), and you want to use the income to qualify for Earned Income Credit or Additional Child Tax Credit, you can enter the W-2 as is.
  • Note: You may need to enter $0 in box 1 to complete your W-2. If you qualify and want to add your Medicaid wavier payments to your income, select Yes in the Earned Income Credit and Additional Child Tax Credit topics .
• If the only entry on your W-2 is in Box 12 (there's a blank or a $0 in Box 1) and you don’t want or don't qualify to use the income to qualify for Earned Income Credit or Additional Child Tax Credit, you don’t need to enter the W-2 at all.

If your W-2 includes an amount in Box 1 for tax-exempt Medicare waiver payments from In-Home Supportive Services (IHSS), you should request a corrected W-2 as your payments should only be reflected in Box 12.

If you can't get a corrected W-2, follow these instructions:

1. Open or continue your return.
2. Navigate to the W-2 section:
   • TurboTax Online/Mobile: Go to W-2.
   • TurboTax Desktop: Search for w-2 and select the Jump to link.
3. Enter all your W-2 info in the appropriate boxes in TurboTax as they're shown on your form, except enter Box 1 amounts into Box 12 with the designation II, and leave any other dollar fields blank.
4. TurboTax will include the amount you entered in Box 12 as income on Line 1d of your Form 1040 and will subtract the amount on Line 8. This means you won’t be taxed on these wages on Form 1040.

If your W-2 includes a zero in Box 1 for tax-exempt Medicare waiver payments from In-Home Supportive Services (IHSS), you should request a corrected W-2 as your payments should only be reflected in Box 12.

If you can't get a corrected W-2, follow these instructions:

1. Open or continue your return.
2. Navigate to the Wages & Income section and scroll down to Less Common Income. 
3. Select Start next to Miscellaneous Income, 1099-A, 1099-C.
4. Select Start next to Other income not reported on a Form W-2 or Form 1099.
5. Answer Yes on the screen Other Wages Received. 
6. Enter your total Medicare waiver payments on the screen Certain nontaxable Medicaid waiver payments not reported on Form W-2 or 1099.

1. Open or continue your return.
2. Select Income and Expenses from Tax Home.
3. Under Less Common Income, select Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C.
4. Select Start or Revisit next to Other income not already reported on a Form W-2 or Form 1099.
5. Answer Yes to Did you receive any other wages?  and Continue.
6. Continue through the screens, leaving the boxes blank until you get to the Certain nontaxable Medicaid waiver payments not reported on Form W-2 or 1099 screen.
7. Enter the amount of Medicaid waiver payments received. If the 1099 shows zero, enter the actual amount received.
8. Finish entering the rest of your income.
9. When you get to the Earned Income Credit section in Deductions & Credits, we’ll ask if you want to add your Medicaid waiver payment to your income for this credit. You can answer based on what benefits you most. However, you may need to include difficulty-of-care or Medicaid waiver payments as income on your state return. For example, Pennsylvania requires this even though the payments aren't taxed by the federal government.