True or False: Qualified Medicaid waiver payments may be excluded from gross income.

Qualified Medicaid waiver payments can indeed be excluded from gross income. This exclusion applies specifically to payments made under certain Medicaid waiver programs that help individuals with disabilities, the elderly, or those needing long-term care services. These payments are designed to assist with medical expenses and allow individuals to maintain their independence, which leads the IRS to consider them non-taxable.

The rationale behind this exclusion is to provide financial support to those in need without burdening them with additional tax liabilities. This helps ensure that the funds meant for care and assistance are fully available for their intended purpose. It's important for recipients to understand that only qualified payments fall within this exclusion, emphasizing the necessity of adhering to the specific regulations surrounding Medicaid waivers.

Other choices, such as the idea that the ability to exclude payments depends on the state or requires IRS approval, do not apply in this context. The exclusion is firmly established within federal tax law regarding qualified Medicaid waiver payments.