Does income from rental properties impact LTC?
Rental Property & Medicaid Eligibility – Quick Facts
Up to $6,000 of equity can be exempt if the property generates annual income of at least 6% of its equity value.
Yes—Medicaid counts rent toward your income limit, though some deductions may apply.
Property must produce income ≥ 6% of equity to qualify for exemption; otherwise the full equity counts.
Yes—New York exempts up to $12,000; Florida exempts the full value if local rent standards are met.
Proof of ownership, value, debt, and rental income—often deeds, tax statements, leases, and receipts.
Yes—Certified Medicaid Planners can use trusts, spend down strategies, or exemptions to protect assets.
How Does Owning Rental Property Affect Medicaid Eligibility?
Owning rental property—whether it’s an apartment, condo, farmland, timber rights, or mineral rights—can affect both your Medicaid asset and income eligibility. While up to $6,000 of equity can be exempt if certain criteria are met, the rest may count toward your asset limit. Additionally, rental income always counts toward your income limit for Medicaid purposes.
What Is the Medicaid Asset Limit?
In 2025, most states cap assets at $2,000 for a single applicant. Rules vary for married couples depending on whether one or both apply. When one spouse applies for long-term care Medicaid, the other may keep more through the Community Spouse Resource Allowance (CSRA), which can be up to $157,920 in 2025.
When Is a Rental Property Exempt from Medicaid’s Asset Limit?
What Is the 6% Rule and How Does It Work?
Medicaid will disregard up to $6,000 of a property’s equity if it earns at least 6% of its equity value in annual income. Equity is the fair market value minus any debt. If income is less than 6%, the full equity counts.
What Are Examples of the 6% Rule in Action?
Fully Exempt
Lot worth $2,000 rents for $600/year — income exceeds 6% ($120), so all $2,000 is exempt.
Partially Exempt
Apartment worth $10,000 rents for $4,200/year — $6,000 exempt, $4,000 counts toward the asset limit.
Not Exempt
Farmland worth $4,500 rents for $200/year — income below 6% ($270), so full $4,500 counts.
Do States Calculate the 6% Rule Differently?
Some states (DE, OH, UT, WV) use 6% of the excluded equity value instead of total equity when calculating eligibility.
How Does Medicaid Treat Multiple Rental Properties?
The 6% test applies separately to each property. Equity from properties meeting the 6% rule is combined, but only $6,000 total can be exempt. The rest counts toward the asset limit.
Can You Get an Exception if the 6% Rule Isn’t Met?
If income drops below 6% for reasons outside your control, some states allow a temporary exemption if the property is expected to meet the 6% rule again—typically 18–24 months depending on the state.
What Documentation Will Medicaid Require for the Exemption?
- Proof of ownership (deed, will, tax statement)
- Proof of value and debt (mortgage statement, appraisal)
- Proof of income (lease, rent receipts, bank statements, tax returns)
How Do State Rules Differ on Rental Property Treatment?
- Higher exemptions: NY exempts $12,000; FL exempts entire equity if rent meets local market standards.
- Calculation methods: Some states use excluded equity instead of total equity for the 6% test.
- Return-to-6% window: Varies from 18 to 24 months.
What Are Your Options If Rental Property Puts You Over the Asset Limit?
Can You Sell and Spend Down the Proceeds?
Yes—sell property and spend on exempt assets (e.g., home improvements, funeral trusts) without violating the Medicaid Look-Back Rule.
Can a Medicaid Asset Protection Trust Help?
Yes—placing property in an irrevocable trust before applying can protect it from the asset test and Medicaid Estate Recovery, but it must be done well in advance.
Should You Consult a Professional Medicaid Planner?
Absolutely—state rules are complex and vary widely. A Certified Medicaid Planner can help protect assets while maintaining eligibility.
