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

by Intuit Updated 2 months ago

Your tax-exempt Medicaid waiver payments from in-home supportive services (IHSS) may be on a W-2, 1099, or no form at all, depending on where you live.

Select the form you received and follow the instructions to enter your payment in TurboTax.

  1. Sign in to TurboTax and open your return.
  2. Select Search, enter w-2, and select Jump to w-2.
  3. Enter all your W-2 info as shown on your form, except Box 1.
  4. If you have a number instead of zero in Box 3, enter that number again in Box 1.
  5. On the Let’s check for uncommon situations screen, select the box next to Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.
  6. Enter the amount of Medicaid waiver payments into the difficulty of care payment you received from IHHS box.
    • This is the same amount reported in boxes 3 and 5 of your W-2.
    • Your payments are nontaxable, but TurboTax uses this number to calculate credits you may qualify for.
  7. When you get to the Earned Income Credit section in Deductions and 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.

Note: If your TurboTax navigation looks different from what’s described here, learn more.

  1. Sign in to TurboTax and open your return.
  2. Select Federal, then Wages & Income.
  3. Under Less Common Income, select Start or Revist next to Miscellaneous Income, 1099-A, 1099-C.
  4. Select Start or Revist next to Other income not already reported on a Form W-2 or Form1099.
  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 and 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.

These steps will ensure your exempt income is reported accurately while still allowing you to electronically file.

If you don't have any dollar amounts on your W-2, you qualify to exclude the income under IRS Notice 2014-7, and you don't expect to qualify for Earned Income Credit or Additional Child Tax Credit, then you don't need to enter the W-2 at all.

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