Do Caregivers Pay Taxes on Michigan Home Help Program Payments?
If you're getting paid through Michigan’s Medicaid Home Help Program, you may be wondering — do I have to pay taxes on this income?
The answer depends on your relationship to the person receiving care and your tax situation. In this blog, we’ll break down how caregiver payments are treated by the IRS and what you need to know for tax season.
💵 Are Home Help Payments Considered Income?
Yes. Payments made through the Home Help Program are generally considered taxable income, especially if you are not living with the person you’re caring for. However, there are some exceptions.
🏠 Exception: IRS “Difficulty of Care” Rule (Section 131)
If all of the following apply to you, your caregiver income may be excluded from taxable income under IRS guidelines:
You are caring for a family member or foster individual
You live in the same home as the person receiving care
The person receiving care qualifies for Medicaid-funded in-home support
You are not working through an agency, but directly under a state-funded program
This rule is often referred to as the “Difficulty of Care” exclusion.
🧾 What If I Don’t Live With the Person?
If you provide care but do not live in the same household as the person receiving services, your payments are likely fully taxable.
You may receive a 1099 form at the end of the year, which must be reported on your federal tax return. In this case, you're treated as an independent contractor by the state.
💡 Key Tax Scenarios (Copy-Friendly Format)
1. Lives with care recipient and meets all IRS criteria:
May qualify for tax exclusion under IRS Notice 2014-7
2. Does not live with care recipient:
Most likely must report payments as taxable income
3. Provides care through an agency or business:
Payments are reportable as self-employment income and may require a Schedule C
📋 Will I Receive a 1099?
Some caregivers do. Others may not, depending on how payments were issued and whether you meet the exclusion criteria.
Even if you don’t receive a 1099, the IRS still expects you to report income unless it's legally excluded.
🧑💼 Should I File as Self-Employed?
Caregivers who receive Home Help payments and are not exempt under IRS rules are typically considered self-employed. This means:
You may need to file a Schedule C with your tax return
You’re responsible for self-employment taxes (Social Security and Medicare)
You may be able to deduct certain expenses, such as mileage or caregiving supplies
📞 What If I’m Not Sure?
Taxes can be confusing, especially if this is your first time being paid as a caregiver. Here’s what you can do:
Talk to a tax professional who understands Medicaid-funded caregiver payments
Review IRS Publication 525 and Notice 2014-7
Visit irs.gov for updates on caregiver income rules
🧭 Final Thoughts
Being paid to care for a loved one is a unique role — and the tax rules that apply aren’t always clear. Knowing when income is taxable and when it’s not can save you stress and help you stay compliant.