Account for Medicaid waiver payments

Medicaid waiver payments help people who otherwise would require care in a hospital, nursing facility, or intermediate care facility to receive care in an individual care provider's home. 

How to account for the Federal Income Tax exemption

For tax purposes, the IRS treats these Medicaid waiver payments as difficulty of care payments, excludable from gross income under section 131 of the Internal Revenue Code.

Gusto does not currently support this type of wage payment. For an employee who is impacted by Medicaid waiver payments and needs to account for the Federal Income Tax exemption, refer to this IRS guidance—under “Individual Care Provider Questions,” scroll to “Q11." Q11 addresses a case when exempt wages are reported on Form W-2 and taxed. It provides direction on how to correct this on an individual’s personal income tax return.