Rental Properties Impact on Medicaid Eligibility

Last updated: February 10, 2022
Medicaid Long Term Care | Questions and AnswersCategory: EligibilityRental Properties Impact on Medicaid Eligibility
medicaidplanner Staff asked 6 months ago

Are rental properties counted as income or assets or both for Medicaid eligibility purposes?

1 Answers
medicaidplanner Staff answered 3 years ago

Like many things Medicaid related, there is not a single, simple answer that holds true across all of the 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 equity value is not counted towards Medicaid’s asset limit. (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.) To be clear, any amount of equity value over $6,000 is counted towards Medicaid’s asset limit. However, in order for the $6,000 exemption, the annual income produced from the rental must be at least 6% of the property’s equity value. (In most states, the asset limit is $2,000. To see asset limits by state, and other assets that are exempt for Medicaid purposes, click here.) For most rental property homeowners, unless the property is underwater, their equity would likely exceed $6,000 and therefore 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. What this means is 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. Generally speaking, in 2022, the income limit is $2,523 / month for long-term care Medicaid. To see income limits by state, click here.

Please 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 mortgage payments, 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 here.

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