Taxes, Cash & Savings · Surprise rank #2
Paid to Care Through a Medicaid Home-Care Program? Those Wages Can Be Tax-Free
Some qualifying Medicaid home- and community-based waiver caregiver payments can be excluded from federal taxable income under IRS Notice 2014-7.
Who
Caregivers receiving qualifying Medicaid waiver payments for care provided to an eligible person who lives in the caregiver's home.
What to do
Start here: Compare your exact payment arrangement with the IRS Notice 2014-7 guidance and keep documentation of the qualifying Medicaid waiver payments.
Eligibility: The payment and living arrangement must meet IRS Notice 2014-7 conditions; not every Medicaid or home-care payment qualifies.
What you get
Qualifying Medicaid HCBS waiver caregiver payments may be excluded from federal gross income.
Benefit: Federal income-tax exclusion on qualifying caregiver payments.
Possible value: Varies with the amount of qualifying caregiver pay and the caregiver's tax situation.
Good to know
Important: The exclusion applies to qualifying Medicaid waiver/difficulty-of-care payments for care provided in the caregiver's own home where the care recipient lives. It does not automatically cover every home-care payment, and federal income-tax treatment can differ from FICA treatment.
Availability: Active
Why people miss it: These payments can look like ordinary taxable caregiver wages even when special federal tax treatment applies.
Sources reviewed: Aug 10, 2026