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There are two types of payments that are excluded form income tax.
- providing care to qualified foster individuals AND difficulty-of-care payments.
Difficulty-of-care payments. These are additional payments that are designated by the payer as compensation the additional care that is required , mentally, or emotionally handicapped qualified foster individuals. A state must determine that the additional compensation is needed, and the care the payments are made must be provided in your home.
So far - based on your information - compensation you are receiving does qualify.
Please communicate with the payer and verify that such payments would not be reported to the IRS as taxable.
If they do report - you would need to report that amount on your tax return and claim an adjustment according with
Correspondingly - these payments will NOT be included into your taxable income and will not affect your qualification for the health insurance subsidy.
Previously IRS held position that such income is NOT taxable if the taxpayer cares for the no related person and taxable if that person is related to the taxpayer.
HOWEVER - not long ago - the IRS changed that position
see here -
This notice provides that certain payments received by an individual care provider under programs, described in this notice, are difficulty of care payments excludable from gross income under section 131 of the Internal Revenue Code.
This notice is effective received on or after January 3, 2014.
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