Whether your IHSS income is taxable depends largely on one fact: do you live in the same home as the recipient you care for? The answer affects your federal income taxes, California state income taxes, and Social Security and Medicare (FICA) withholding. This guide explains the rules in plain language — including how to claim the exemption, what form you need, and what to do if taxes were withheld when they should not have been.
Important: This guide is for general informational purposes. Tax rules change and individual situations vary. Always consult a qualified tax professional or legal aid organization for advice specific to your situation. Visit IRS.gov for authoritative federal guidance.
The short answer: it depends on your living situation
Most IHSS providers who live with the recipient they care for are exempt from federal income tax on their IHSS wages under IRS Notice 2014-7. This means if you are a live-in provider — you share a permanent home with your recipient — your IHSS earnings may not count as taxable income for federal purposes.
Non-live-in providers do not qualify for this exemption. If you travel to your recipient's home each workday and return to a different residence, your IHSS wages are treated as ordinary W-2 income and are subject to normal federal and California income tax rules.
IRS Notice 2014-7 explained
In January 2014, the IRS issued Notice 2014-7, which provides that certain payments under Medicaid waiver programs — including California IHSS — can be excluded from gross income for federal income tax purposes. The key qualifying condition is that the care must be provided in the individual's home, and the caregiver must also live in that same home.
The exclusion applies to the IHSS wages themselves — not just a portion of them. For a provider in San Franciscoearning $23.00/hour working 283 hours per month, the monthly IHSS income is approximately $5,800. If that provider lives with their recipient and has filed SOC 2298 with the county, those wages may be entirely excluded from federal gross income. The annual tax savings can be substantial — potentially $3,000–$8,000 depending on the provider's total income and tax bracket.
The exclusion is not automatic. It requires the provider to meet the eligibility criteria and to have properly certified their live-in status with the county. Even providers who clearly qualify may have taxes withheld by default if they have not completed the necessary paperwork.
Who qualifies for the tax exemption
Live-in providers who are not the recipient's parent or spouse:Generally exempt from federal income tax on IHSS wages if they reside permanently in the recipient's home and have filed SOC 2298.
Parent providing care for a disabled child in the family home: Generally exempt. IRS Notice 2014-7 applies when a parent lives with and provides care for a disabled child. The parent must live in the same home — they cannot provide care from a separate address and claim the exemption. See our parent and spouse provider rules guide.
Spouse providers: Rules are more complex. The IRS has issued some guidance suggesting that spousal IHSS caregiving may qualify, but the application is not as clear-cut as for non-spousal live-in providers. Consult a tax professional before assuming exemption status.
Non-live-in providers: Do not qualify. Standard W-2 income tax rules apply to all IHSS wages.
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California generally follows the federal treatment for IHSS wages. Providers who qualify for the IRS Notice 2014-7 federal exclusion are also typically exempt from California state income tax on those same wages. This is significant because California has relatively high state income tax rates — the exemption can represent an additional $500–$2,000 or more in annual tax savings depending on income level.
The California Franchise Tax Board (FTB) has confirmed that the state exclusion aligns with the federal exclusion for qualified IHSS providers. If you are exempt at the federal level under IRS Notice 2014-7, you should also exclude those wages from your California state return. If you are unsure how to report this on your return, consult a tax professional or contact the FTB directly.
Social Security and Medicare (FICA)
FICA taxes — the Social Security and Medicare payroll taxes — are handled separately from income taxes and follow different rules for IHSS providers. Non-live-in providers are subject to FICA on their IHSS wages. Live-in providers, and specifically family members providing care in the home, may also be exempt from FICA depending on their relationship to the recipient.
If taxes are being withheld from your paychecks, your pay stub will show FICA deductions. If you believe you should be exempt — because you are a live-in family member provider who has filed SOC 2298 — and you are seeing FICA withholding, contact your county IHSS office to verify your status. A FICA exemption must be established through the county payroll system; it is not self-applied.
SOC 2298 — the live-in self-certification form
To claim the live-in tax exemption, providers must file SOC 2298 — the Live-In Self-Certification form — with their county IHSS office. This form certifies that you reside in the same home as the IHSS recipient you care for. Without SOC 2298, your county will withhold taxes from your IHSS wages even if you are otherwise eligible for the exemption.
SOC 2298 must be completed and submitted once. It does not need to be renewed annually unless your living situation changes. If you move out of the recipient's home — even temporarily — you are no longer a live-in provider and the exemption no longer applies. If you move back in, you must file a new SOC 2298.
The form is available from your county IHSS office and may be downloadable from your county's website. For live-in provider rules including how SOC 2298 affects your scheduling, see our live-in provider rules guide.
What to do if taxes were wrongly withheld
If you were eligible for the IRS Notice 2014-7 exemption but had federal income tax withheld from your IHSS wages, you may be able to recover those taxes. The process involves filing an amended federal tax return (Form 1040-X) for the affected year, excluding the IHSS wages from gross income, and recalculating your tax liability. The difference between taxes paid and taxes owed is your refund.
The IRS generally allows amended returns for up to three years after the original return was filed. If you have multiple years of wrongly withheld taxes, you may be able to file multiple amended returns. Legal aid organizations in California that specialize in social services law can help with this process at no cost to qualifying low-income providers.