Can IHSS Affect My Taxes or Other Income Reporting?

If you're a parent or caregiver receiving payment through In-Home Supportive Services (IHSS), it's important to understand how those payments may—or may not—affect your taxes and income reporting. Many people are surprised to learn that IHSS income can be treated differently from other types of income, especially when the provider and the recipient live in the same home.

Let’s break it down.

IHSS Income and Federal Taxes

Whether or not your IHSS income is taxable depends on two key factors:

1. Do you live in the same home as the person you're caring for?

If you live in the same home as the IHSS recipient—such as a parent caring for their child—your IHSS income may be excluded from gross income for federal tax purposes, under IRS Notice 2014-7.

This rule applies even if you are:

• A parent caring for your child with disabilities
• A relative caregiver living with the recipient
• Providing care under IHSS or WPCS (Waiver Personal Care Services)

Under this IRS guidance, your IHSS payments can be considered difficulty-of-care payments, which are not subject to federal income tax.

2. Are you paid through the IHSS program or a waiver program?

The rule applies to both regular IHSS and WPCS programs as long as:

• You’re providing non-medical support
• You live with the person you're caring for

However, if you live outside the recipient’s home, your IHSS income is generally taxable.

Do I Need to File Taxes If My IHSS Income Is Excluded?

Even if your IHSS income is excluded from federal taxes, you still need to:

• Report it to the IRS correctly on your tax return, if required
• Keep accurate records of your IHSS payments
• Consider filing a return anyway if you qualify for tax credits (like the Earned Income Tax Credit or Child Tax Credit), even with little or no taxable income

Also, the IRS may still issue you a W-2 form for your IHSS income, even if it ends up being non-taxable.

What About State Taxes in California?

As of now, California follows the IRS guidance, meaning that IHSS income that qualifies as difficulty-of-care is also excluded from state income tax.

But it's a good idea to double-check your situation with a tax professional, as tax rules can change or be interpreted differently depending on your unique case.

Does IHSS Income Count Toward Other Benefits?

Even if IHSS income is excluded for tax purposes, it may still count as income for other programs. For example:

• CalFresh (food stamps): IHSS income is generally excluded.
• Section 8 or subsidized housing: It may or may not be counted; check with your local housing authority.
• SSI/SSDI or Medi-Cal: The income rules are different depending on your role and your child’s eligibility.

Always report IHSS income honestly when applying for or renewing benefits and clarify how it’s treated in each program.

Key Takeaways

• If you live with the person you’re caring for, your IHSS income may be non-taxable under federal and state law.
• You may still receive a W-2 form, even if the income is excluded.
• IHSS income may affect other benefit programs, depending on their specific rules.
• When in doubt, consult a tax professional familiar with IHSS and public benefit rules.

Understanding the tax and income implications of IHSS payments is crucial, especially for parents caring for children with special needs. Taking the time to report everything correctly can help you avoid tax issues and protect your eligibility for other services.

Need help? In California, the In-Home Supportive Services (IHSS) program provides crucial financial help for families raising children with special needs. American Advocacy Group is on the front lines every day, making positive change happen for people diagnosed with autism, Down syndrome, and a range of diagnoses across the continuum. As a leading advocate for all people with intellectual and developmental disabilities and their families, and the premier provider of the support and services people want and need, we understand the system and know how to take action regarding your best interests.

CONTACT US FOR HELP. Dial (877) 762-0702 or email us at [email protected].