Certain Medicaid Waiver Payments Excludable

A recent IRS notice provides that individual care providers who receive certain payments under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) are receiving difficulty of care payments. You should be aware that these payments are excludable from federal tax.

IRS Code Section 131(b)(1) defines a qualified foster care payment, in part, as any payment under a foster care program of a state or a political subdivision that is either (1) paid to the foster care provider for caring for a qualified foster individual in the foster care provider’s home, or (2) a difficulty of care payment.

The notice states that the IRS will treat certain Medicaid waiver payments as difficulty of care payments under section 131, and that this treatment will apply whether the care provider is related or unrelated to the eligible individual.

The professionals in our office can help you address this issue and how it may affect you.