Earned income credit and Medicaid Waiver Payments

stanw Member Posts: 2 Level 2

I'm filing my taxes online this year and have a question regarding the Earned Income Credit (EIC). I received two W-2 forms, one of which was Medicaid Waiver Payments that can be excluded from taxable income. This exclusion has brought my taxable income below the $16K threshold, making me eligible for the EIC. However, my previous tax return files by a tax preparer have shown a "NO" on the dotted line of "Line 27 Earned Income Credit (EIC)". I'm wondering if I should claim the EIC for this year?

Best Answer

  • Taxlady06
    Taxlady06 FreeTaxUSA Agent Posts: 59
    Answer ✓

    If you have Medicare Wavier payments, these payments non-taxable, however these amounts can be used to qualify for the Earned Income Credit (EIC) if desired. Depending on your circumstance adding these payments can increase or decrease your EIC.

    In our software if you select the "Income" tab and then "Other Income" from the drop-down menu, you can indicate in this section that you have Medicare Wavier Payments and you would like to include this for the calculation for the EIC. If this is indicated, you can list the amount of your payments and our software will include this amount. If you qualify, the EIC will be added to your return. You can try including and removing the payment amount to see which option will result in the best outcome based on your personal return.

    This process is the same for a 2021 and 2022 return.


  • stanw
    stanw Member Posts: 2 Level 2

    I forgot to mention that for previous tax filings (2021, 2022), I also had two W-2s. One was for Medicaid Waiver Payments, and the other was for taxable income that was lower than 15k.