Live-In IHSS Providers May Be Eligible For IRS Tax Exemption
IRS Notice 2014-7
In 2014, the IRS created an income tax exemption that applies to individuals being paid through certain federal Medicaid funded programs and who meet a number of additional criteria including living with the consumer to whom they provide care services.
The language of the exemption is complicated and not clear as to whether it would apply to Providers in the IHSS Program. However, in March 2016, IRS provided a letter of guidance to the California Department of Social Services indicating that IHSS Providers who live with their consumers are probably eligible for the income tax exemption.
This means that if you are an IHSS provider who lives with your consumer, there is a good chance that you qualify for the federal income tax exemption.
We are not qualified as tax experts or advisors, so we strongly urge you to consult with a tax preparer or attorney to determine whether you qualify for this exemption.
Here are links to some materials you may wish to review and share with your tax advisor:
- IRS Notice 2014-7: http://www.irs.gov/pub/irs-drop/n-14-07.pdf
- IRS Q&As: http://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income
- IRS Guidance to California DSS: http://www.cdss.ca.gov/cdssweb/entres/pdf/IRSIHSSLetterNewsRelease.pdf
PLEASE NOTE: If an IHSS Provider is eligible for the IRS tax exemption, the impact is specific to the IRS, and simply means that, when filing federal income taxes, the income received through the IHSS program would not count toward the taxable gross income. However, be aware that the exemption does not apply for purposes other than federal income tax, so income received would likely still count as income for other purposes such as state income tax and for eligibility to be a union member and pay dues.
Disclaimer: By providing this general information, the Union is not rendering accounting, business, financial, investment, legal, tax, or other professional advice. This information is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or taxes. Before making any decision or taking any action with respect to the matters discussed herein, you should consult a qualified professional adviser. The Union is not responsible for any loss sustained by any person who relies on this information.