Individuals who live in Indiana and receive Medicaid payments; do not live at home; and receive care at a hospital, skilled nursing facility, intermediate care facility, licensed county home, licensed boarding or residential home, or certified Christian Science facility may be eligible to take the Human Services Tax Deduction. Per the 2013 Indiana IT-40 Full Year Resident Individual Income Tax Booklet, the Human Services Tax Deduction is intended to eliminate any individual income tax imposed on Medicaid recipients living in the aforementioned facilities. This is done by reducing the individual’s adjusted gross income tax liability to zero (0). This does not, however, result in a refund.
If you are a Medicaid recipient living in one of the facilities mentioned above, you must first prepare your tax return without claiming the Human Services Tax Deduction to determine if you are eligible to take the deduction. As a general rule, if a refund is due to you without taking the human services deduction, you are ineligible for the deduction. If, however, you determine that you owe the State money when preparing your tax return without taking the deduction, you are eligible to use the Human Services Tax Deduction. On Schedule 2 under line 11a, enter deduction name “Human Services Tax Deduction”, code “605” and the deduction amount. The amount of total deductions from Schedule 2 (line 12) must be equal to the total of Federal Adjusted Gross Income and Indiana Add-Backs (Schedule 1). The amount to list for the Human Services Tax Deduction will be equal to total deduction less any other deductions.
For Indiana Medicaid recipients living at home, not in one of the qualified facilities listed above, or who are determined to be ineligible for the Human Services Tax Deduction, it may be necessary to make estimated tax payments to avoid owing a penalty if you receive income (not subject to tax withholding), such as pension income. Schedule IT-2210 may be utilized to calculate the amount of estimated payments as well as to determine if any penalty will be due or whether an exception to the penalty has been met. Generally, if an individual owes $1,000 or more in state and county tax for the year that is not covered by withholding taxes, you will need to make estimated tax payments.
Always consult an accountant if you need assistance with this deduction or have questions on any other deductions or credits you might be eligible for.