IRS Notice 2014-7: How Certain Caregiver Payments May Be Tax-Exempt
Caring for a loved one or providing home-based support to individuals with disabilities is a deeply meaningful and essential role. If you are a caregiver receiving payments through a Medicaid Home and Community-Based Services (HCBS) waiver program, you may qualify for an important tax benefit under IRS Notice 2014-7. This notice allows certain caregiver payments to be excluded from taxable income, potentially reducing your federal and state income tax liability.
What Is IRS Notice 2014-7?
IRS Notice 2014-7 states that payments received under a Medicaid Home and Community-Based Waiver program for providing personal care services can be classified as “difficulty of care” payments. These payments may be excludable from gross income if:
✔️ The caregiver is living full-time in the same household as the care recipient.
✔️ The payments are made through a Medicaid waiver program for non-medical personal care services.
This tax exemption can be highly beneficial for caregivers who provide ongoing support to family members or individuals with developmental disabilities. By reducing taxable income, caregivers may see a lower tax obligation, allowing them to maximize their financial resources while continuing to provide quality care.
Arizona’s Medicaid Program and HCBS Waivers
In Arizona, the Arizona Health Care Cost Containment System (AHCCCS) is the state agency responsible for administering Medicaid. The Arizona Department of Economic Security (ADES) / Division of Developmental Disabilities (DDD) oversees the Medicaid waiver program, which funds HCBS services for individuals with developmental disabilities.
ABC Care LLC is committed to helping caregivers navigate these programs. If you provide care to a loved one, you may be eligible for compensation through an HCBS waiver while benefiting from tax-exempt wages under IRS Notice 2014-7.
How to Determine If This Applies to You
If you are a full-time live-in caregiver, there is a strong possibility that your caregiver wages qualify for tax exemption under this notice. However, tax laws can be complex, and eligibility may vary based on individual circumstances. Before making any tax-related decisions, we strongly recommend consulting with a tax professional to confirm your eligibility.
Where to Find More Information
To read the full IRS Notice 2014-7, visit:
IRS Notice 2014-7
For FAQs regarding Medicaid waiver payments and tax exclusion, refer to the IRS guidance here:
Certain Medicaid Waiver Payments May Be Excludable from Income
How ABC Care LLC Can Help
At ABC Care LLC, we specialize in supporting family caregivers by helping them become certified and receive compensation for the essential care they provide. If you are interested in learning more about becoming a paid caregiver for your loved one, our team is here to guide you through the process.
📞 Contact us today to explore your options and get started on your caregiving journey!
