Does Medicaid Count your Business Income?
Business or Trade Income & Medicaid – Quick Facts
Yes. Self-employment earnings are counted toward the income limit for eligibility.
Yes. Allowable business deductions (materials, wages, rent, insurance, etc.) lower your net income.
Medicaid typically uses last year’s net self-employment income and averages it over 12 months.
States may project income from months operated or average seasonally—rules vary by state.
Tax schedules (C/E/F), bank statements, books, invoices, and receipts for expenses.
Consider a Qualified Income Trust (if allowed) or Medically Needy spend-down; consult a planner.
Can you run a business and still qualify for Medicaid?
Yes. Owning and operating a business does not disqualify you by itself. However, self-employment income counts toward Medicaid’s income limit, so you’ll need to calculate your net earnings (after allowable business deductions) to see if you qualify—or to plan how to reduce countable income.
What 2025 income limits should you know before applying?
- Regular/ABD Medicaid (single): usually $967 or $1,304.17 per month.
- Regular/ABD Medicaid (married, combined): usually $1,450 or $1,762.50 per month.
- Nursing Home Medicaid / HCBS Waivers: typically $2,901 per month per applicant.
If only one spouse applies for long-term care Medicaid, the other spouse’s income is generally not counted—and the non-applicant may receive a Monthly Maintenance Needs Allowance from the applicant’s income.
How does Medicaid figure out your business income each month?
Why does Medicaid use net income instead of gross?
Medicaid counts net self-employment income—gross receipts minus allowable business expenses—because it reflects the money actually available to you.
How is the monthly average computed in practice?
Agencies typically use last year’s tax return to find your net annual income and divide by 12.
- Example (Electrician): $18,000 gross − $4,000 expenses = $14,000 net → $1,166.66/mo.
- Example (Bakery): $36,500 gross − $12,000 expenses = $24,500 net → $2,041.66/mo.
What if your business is new—how is income projected?
If you operated only part of last year, Medicaid may project income from the months you were active. For instance, net of $21,000 over 7 months projects to $3,000/mo for the current year. If too new for that method, recent records and a signed statement of expected income/expenses may be used.
How is seasonal business income treated—only in season or spread over the year?
It depends on the state. Some apply income only to the months worked (e.g., snow removal counted over winter months); others average net seasonal income across all 12 months. A few states always annualize seasonal earnings. Check your state’s approach.
Which business expenses can you deduct to reduce countable income?
- Materials, supplies, tools, and inventory
- Employee wages and benefits
- Interest on business loans (not principal)
- Rent/lease for space or equipment
- Maintenance, repairs, and utilities
- Business taxes, licenses, and permits
- Insurance premiums (e.g., liability, property)
- Advertising/marketing and business mileage
Some states allow federal/state/local income taxes as deductions; others do not. Always confirm your state’s rules.
What proof will Medicaid ask for when reviewing your business income?
How do you document income?
- Tax schedules: Schedule C (business), Schedule E (rents/royalties), or Schedule F (farming)
- Business bank statements showing deposits
- Accounting/bookkeeping reports
- Signed attestation if no other records exist
How do you document deductible expenses?
- Tax returns reflecting deductions (Schedule C/E/F)
- Bank statements showing expense payments
- Invoices, bills, and receipts
What if your net income is still over Medicaid’s limit—what strategies can help?
Could a Qualified Income Trust (Miller Trust) make you eligible?
In Income-Cap states, a QIT lets you deposit “excess” income into an irrevocable trust. Funds are restricted to approved uses (e.g., personal needs allowance, spousal allowance, care costs). Not every state permits QITs.
Does the Medically Needy (Spend-Down) pathway apply in your state?
In spend-down states, you can apply “excess” income to medical bills (e.g., nursing home charges, prescriptions) until you reach the Medically Needy Income Level, qualifying for the rest of the period. Availability for seniors and for specific programs varies by state.
Why involve a Certified Medicaid Planner?
Rules on projections, seasonal averaging, and allowable deductions differ by state. A planner can optimize deductions, select the right eligibility pathway (QIT vs. spend-down), and prepare documentation to avoid delays or denials.
