Gifting

Is Giving a Gift Always Taxable—or Even Allowed Under Medicaid?

Giving money, property, or other valuables can feel generous, but the IRS and Medicaid see gifts very differently. While the IRS has clear tax exemptions, Medicaid’s rules are stricter and can turn a well-meaning gift into a roadblock for long-term care eligibility.

How Does the Federal Gift Tax Work?

Who pays the tax—the giver or the receiver?

The gift tax is a federal tax applied when someone transfers something of value without full payment. The donor (giver) is responsible for paying it—not the recipient.

What is the Annual Gift Tax Exclusion?

In 2025, you can give up to $19,000 to each person without filing a Gift Tax Return (Form 709). A married couple can give a combined $38,000 to each recipient per year without reporting it. There’s no limit to how many people you can gift in a year, and certain gifts—like direct tuition or medical payments—are always exempt.

What about the lifetime limit?

The Lifetime Gift Tax Exclusion in 2025 is $13.99 million per person ($27.98 million for married couples). Gifts over the annual limit count toward this total. Even large gifts up to the lifetime maximum are usually tax-free, but they reduce how much you can give in the future without tax. This exemption will drop sharply in 2026—likely to around $5 million per person.

Does the IRS Gift Tax Rule Apply to Medicaid?

Can you give $19,000 a year without hurting Medicaid eligibility?

No. Medicaid does not honor the IRS Annual Gift Tax Exclusion. Any gift—no matter the amount—made during Medicaid’s Look-Back Period can cause ineligibility for long-term care coverage.

What Is Medicaid’s Look-Back Period—and Why Does It Matter?

How far back does Medicaid check?

Most states review the past 60 months (5 years) of financial history for Nursing Home Medicaid and HCBS Waivers. New York currently has no look-back for Community Medicaid, but plans to implement a 30-month period no sooner than 2025. California has no asset limit and therefore no look-back relevance.

What happens if you gave gifts during this time?

If you gave away assets or sold them for less than market value, Medicaid imposes a Penalty Period—a set time you cannot receive benefits. The length depends on the gift’s value and average nursing home costs in your state.

Are There Any Gifting Exceptions That Medicaid Allows?

Yes. Certain transfers, such as giving a home to a caregiver child or to a sibling who also has an ownership share and lives there, may be exempt from penalties.

What If You Already Gave a Gift That Violates the Look-Back Rule?

Can returning the gift help?

Often. If the recipient returns the gift in full (or partially, in some states), Medicaid may recalculate the penalty. However, returned funds may put you over the asset limit, requiring a spend-down.

How can you spend down without breaking the rules?

Acceptable spend-downs include paying for care, eliminating debt, making home safety upgrades, or purchasing an Irrevocable Funeral Trust. These do not trigger new penalties.

What if you can’t get the gift back?

You might apply for an Undue Hardship Waiver, which is rarely granted and requires proving denial of Medicaid would leave you without essential needs like housing, food, or medical care.

Can Receiving a Gift Also Disqualify You from Medicaid?

Yes. If you’re already on Medicaid, a gift or inheritance counts toward your income or assets and can push you over the limit. For example, receiving $2,000 when you already have $1,500 in assets could make you ineligible unless you spend the excess immediately in an allowable way.

Why Work with a Medicaid Planning Professional?

Medicaid gifting rules are complex and unforgiving. A certified planner can help you legally protect assets, navigate state-specific rules, and avoid costly penalties.

State Gift Tax & Medicaid Look-Back Quick Reference (2025)

Annual Exclusion, Look-Back Length, and Key Exceptions