Chris Ho, member of the Personal Care Attendant Workforce Council, speaks at a celebration of new contracts for home care workers on November 13, 2023. –Sam Dolan
Sam Drysdale |SHNS
Thousands of live-in personal care attendants who serve MassHealth members will no longer have to pay state or federal income taxes on their wages under a new Internal Revenue Service ruling sought by the Healey administration.
The tax change will affect an estimated 18,000 of the approximately 60,000 personal care attendants (PCAs) employed through the state's MassHealth program, according to the Department of Health and Human Services. This exemption applies only to PCAs who live in the same household as the individual receiving care.
Under the ruling, income earned by live-in workers falls under “hard-care” payments, a category in federal tax law that excludes certain care wages from taxable income. Massachusetts generally follows the federal income tax definition, so payments are also exempt from state income tax.
State officials estimate that the change could save qualifying workers more than $5,000 a year, depending on hours worked and individual tax status.
PCAs assist with daily activities such as bathing, dressing, and transportation, allowing people with disabilities to live independently rather than in an institution. More than 50,000 MassHealth members receive services through the PCA program. The PCA program is a central component of the state's long-term services and support system.
The ruling comes at the request of the PCA Labor Council, a state agency within the Department of Health and Human Services that oversees wages, training and labor relations for PCAs. The City Council asked the Internal Revenue Service to clarify whether PCA wages for MassHealth-funded live-in caregivers meet the federal definition of hardship to pay for care.
Labor advocates and disability groups said the changes could help stabilize a workforce that has long faced recruitment and retention challenges, especially for live-in positions that often involve long hours and intensive responsibilities. The union representing PCA points to rising costs of living and competition from other health and service industries as continuing pressures on the workforce.
The state has approved several changes that will affect PCAs starting in 2023, including raising wages, creating a seniority system, expanding premium pay for certain holidays, and quickly establishing a retirement plan. These changes were negotiated through Congress and funded through the state budget and MassHealth.
Although the tax exemption does not increase hourly wages, proponents argue it acts as a significant boost to some workers' take-home pay without adding any direct costs to state payrolls. The state has agreed to a new contract with home care workers that includes wage increases starting in 2023.
The cost of the PCA program has increased in recent years, increasing from $1.2 billion in fiscal year 2020 to $1.6 billion in fiscal year 2023, and is projected to reach $2 billion by fiscal year 2027. This rapid growth is largely driven by an aging population, and the Healey government is exploring the possibility of capping the program.
State officials have not disclosed the total amount of tax revenue that will be canceled in connection with the exemption.
Sam Drysdale is a reporter for the State House News Service and State Affairs Pro.
