IRS Notice 2014-7 Caregiver Tax Treatment: Georgia Structured Family Caregiving

What IRS Notice 2014-7 Does

IRS Notice 2014-7, issued in January 2014, provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services (HCBS) waiver program may be treated as difficulty-of-care payments excludable from federal gross income when the care is provided in the provider's home and the care recipient lives there under the recipient's plan of care. Same-home residency is necessary but not, by itself, enough.

In plain terms: if you move in with your aging parent and provide care through a qualifying Medicaid waiver program under the required plan of care, the payments may not be taxable for federal income-tax purposes. Social Security and Medicare tax treatment is separate and depends on whether you are an employee of the agency, an employee of the care recipient, or an independent contractor.

This matters enormously for Georgia families using the Structured Family Caregiving (SFC) program, where daily stipends of $67 to $80 translate to $1,987 to $2,400 per month. The federal income-tax treatment and any FICA obligations can materially affect take-home pay.

How It Applies to Georgia's SFC Program

Georgia's Structured Family Caregiving program operates under the Elderly and Disabled Waiver Program (EDWP), specifically through the CCSP and SOURCE waiver pathways. SFC is a state Medicaid HCBS waiver program — the exact type of program covered by Notice 2014-7.

The core conditions for Notice 2014-7 treatment are:

1. The payments come from a state Medicaid HCBS waiver program. SFC payments are described as funded through Georgia Medicaid's EDWP; confirm the payment and waiver pathway for the specific arrangement.
2. The care is provided in the provider's home, where the recipient lives under the recipient's plan of care. SFC's same-home residency requirement helps satisfy this condition, but the facts of the living arrangement still matter.
3. The payments are for care covered by the recipient's plan of care. SFC caregivers provide personal care and household support; retain the program records that identify the covered services.

Because SFC requires same-home residency as a program condition, many SFC arrangements may meet the core Notice criteria, but do not assume every payment automatically qualifies. The exclusion applies to qualifying payments for care in the provider's home under the plan of care. Even when payments are excludable from gross income, FICA may still apply depending on the employment arrangement.

SFC vs. Personal Support Services (PSS): The Tax Difference

Georgia offers two paid family caregiver programs, and the tax treatment is fundamentally different:

PSS caregivers receive hourly wages that are generally taxable because PSS does not require the caregiver to live with the recipient. Without the required home-and-plan-of-care facts, Notice 2014-7 does not apply.

The practical difference is that a qualifying SFC caregiver may exclude payments from federal gross income, while a PSS caregiver generally has taxable wages and may have withholding. PSS retains the ability to work a second job and live separately.

How to Report (or Not Report) on Your Tax Return

If your SFC payments qualify under Notice 2014-7, they are excluded from federal gross income, but the reporting steps depend on the form received and whether you choose to include the payments in earned income for a credit. The fiscal intermediary may issue a W-2 or 1099 that reports some or all of the payments.

If you receive a W-2 showing qualifying payments:

• If box 1 is blank or shows zero and you are not choosing to include the payments in earned income for a credit, you do not need to report the payments or attach the W-2.
• Otherwise, report the box 1 amount on Form 1040, line 1a, and the box 12 Code II amount on line 1d. Then enter the total nontaxable payments from lines 1a and 1d on Schedule 1, line 8s, as a negative amount.

If you receive a 1099-MISC or 1099-NEC and do not have a separate trade or business providing these services, enter the payments on Form 1040, line 1d, and the nontaxable amount on Schedule 1, line 8s. If you are a sole proprietor, follow the Schedule C instructions and identify the nontaxable amount as an expense with the notation "Notice 2014-7."

Some tax preparation software does not handle this correctly. If your software insists on treating the income as taxable, you may need to enter the offset manually or use a tax professional familiar with Medicaid waiver caregiver payments.

Interaction with Other Benefits

Exclusion from federal gross income does not by itself settle treatment for credits, Social Security, or other benefit programs:

• Earned income for credits. For open tax years, you may choose to include all, but not part, of qualifying payments in earned income for the EITC or Additional Child Tax Credit if the payments are otherwise earned income.
• Social Security and Medicare taxes. Whether the payments are subject to FICA depends on the employment arrangement; exclusion from federal gross income does not answer that question.
• Income-based program eligibility. Medicaid, SNAP, and other means-tested programs have their own rules. Do not assume that federal income-tax exclusion means the payments are ignored by every program.

For a caregiver planning long-term, confirm the worker classification and whether Social Security taxes are being paid; those facts determine whether the arrangement produces covered earnings and credits.

Getting Started with SFC in Georgia

The entry point is your regional Area Agency on Aging (AAA). They handle the DON-R assessment that determines whether your parent meets the Nursing Facility Level of Care standard, the clinical threshold for CCSP/SOURCE waiver eligibility.

The Georgia Care Decision Guide walks through the SFC enrollment process step by step, including the caregiver background check, the daily electronic logging requirement, and the monthly RN and Health Coach home visits that SFC requires.

See more Georgia guides →