It’s that time of year again, tax time. Tax time can be a confusing and frustrating time for many families but even more so for special needs families. It seems there are always new rules and revisions to consider when it comes to filing our taxes each year. This year is no different, however, this year may bring a bit of good news from the IRS for special needs families.
This year the good news is for families who are receiving Medicaid Home-Based Waiver Services.
Effective January 3, 2014, payments received by an individual care provider under a state Medicaid Home and Community Based Services Waiver program are now considered “difficulty of care payments” and are excludable under section 131 of the Internal Revenue Code.
Within Federal guidelines, states can develop Home and Community-Based Services Waivers (HCBS Waivers) to meet the needs of individuals with physical and developmental disabilities, who prefer to get long-term care services and support in their home, rather than in an institutional setting. These services include personal care and other services that often times allow for the individual to hire a parent or other relative to provide the care and receive payment. In 2009, nearly one million individuals were receiving services under HCBS waivers.
Previously the IRS treated the payments as taxable income, now they will be treated as exempt income. This treatment will apply if the services are provided in the home of the care provider whether the care provider is related or unrelated to the eligible individual.
The IRS is expecting to release some FAQs in the near future with further guidance. As always, we encourage families to speak with their tax professional to learn more about how this ruling, and other revisions, will affect your family.
Eligibility requirements and how to access Medicaid Home-Based Services vary from state to state. If you are interested in finding out more about Home-Based Waiver Services available in your state, or have questions about the IRS ruling, please contact Protected Tomorrows at 847-522-8086.