medicaidplanner Staff asked 3 years ago
Are rental properties counted as income or assets or both for Medicaid eligibility purposes?
medicaidplanner Staff answered 5 years ago
Like many things Medicaid related, there is not a single, simple answer that holds true across all situations and states. However, the simple answer is “no, rental home properties, at least in their entirety, do not count as an asset for Medicaid eligibility” and “yes, the income produced from a rental is counted towards Medicaid’s income limit”.
Rental Properties as an Asset:
Based on federal law, for non-business properties that produce income, which in this case is a rental property, $6,000 of its equity value is not counted towards Medicaid’s asset limit if the annual income produced from the rental is at least 6% of the property’s equity value. Equity value is the market value of your home minus the amount you still owe for it. Market value is the amount for which your home could be sold.
Any amount of equity value over $6,000, even if there is an annual 6% return, is counted towards Medicaid’s asset limit. Generally speaking, the asset limit is $2,000. See state-specific asset limits. For most rental property homeowners, unless the property is underwater, their equity would likely exceed $6,000, and therefore, at least a portion of the home would be considered an asset.
As mentioned above, not all states follow the same rules when it comes to income producing properties. For example, Florida has a very lax stance in regards to rental properties being counted towards Medicaid’s asset limit. In fact, none of the value of the rental counts towards Medicaid’s asset limit as long as the rent being charged is fair market value. This means that the rent must be reasonably priced for the location and for the property itself.
Medicaid candidates with rental properties are strongly advised to consult with a Medicaid Planning Professional prior to applying or making the decision to sell the rental property.
Rental Property Income:
Income that is produced from a rental property is counted towards Medicaid’s income limit. See income limits by state.
Note that the entire amount of rent received may not count towards the income limit, as specific expenses may be deducted from the rental income. Examples include real estate taxes, home maintenance and repairs, and property insurance.
If you have a rental property and are applying for Medicaid, it is best to discuss your specific situation with a Professional Medicaid Planner. For seniors who have rental properties that put their income over Medicaid’s limit, Medicaid Experts are familiar with planning techniques, such as Qualified Income Trusts, that can assist in lowering one’s countable income. Find a Medicaid Planner.