In Home Support Services (IHSS)
FTB Conformity to the IRS
IHSS "difficulty of care" payments, referred to as Medicaid Waiver payments, are excluded from gross income pursuant to IRC section 131(c). These difficulty of care payments are defined as compensation to a foster care provider for providing additional care for nonmedical support services under a plan of care to an eligible individual (whether related or not) living in the provider's home.
This means that the wages received by an IHSS provider who lives with the recipient of those services are not considered "gross income" for federal income tax purposes.
California conforms to IRC section 131 under Revenue and Taxation Code (R&TC) section 17131, so it follows IRS guidance, including IRS notices, concerning the provision. As such, IHSS difficulty of care payments made to an individual living with the person for whom he or she provides care will be excludable in California.
Payments made to the provider for care outside of the home where the provider resides are not qualified payments and are not excludable under IRC section 131 for federal or California income tax purposes. See IRS Notice 2014-7 for more information.
You reported payments described in the notice in an earlier year if the time for claiming a credit or refund is open under Revenue and Taxation Code section 19306.
You may file an amended return
- To verify if your specific situation qualifies for the exclusion see the Medicaid Waiver Payments May be Excludable from Income documentation from the IRS.
- IRS Guidance to the California Department of Social Services (DSS)
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Last Updated: 04.25.2018