Over the Home Equity Limit: What Happens

Most people applying for Long-Term Care Medicaid can keep their home. But federal law sets a cap on how much home equity an applicant may have when no spouse or protected relative lives there. In 2026 each state’s limit falls between $752,000 and $1,130,000. Homeowners in high-cost areas, or people who have paid off a valuable home, can find themselves over that line. This guide explains what being over the limit means, what it does not mean, and the legal ways families deal with it.

Figures change periodically. Double-check current amounts before relying on them.

The rule in brief

Under Section 1917(f) of the Social Security Act, a person whose equity interest in their home is above the state’s limit is not eligible for Medicaid payment of nursing facility services or other long-term care services, unless an exception applies. Key points:

Equity is the home’s current market value minus any mortgages, home equity loans or liens.
If the person owns only part of the home, only their share of the equity counts.
The limit is adjusted for inflation each year. For 2026 the federal minimum is $752,000 and the maximum a state may choose is $1,130,000.
From January 1, 2028, no state may use a limit above $1,000,000, with some exceptions for farm property.

See Home equity limits by state for each state’s figure.

When the limit does not apply

The limit does not apply if any of these people lawfully live in the home:

the applicant’s spouse;
the applicant’s child under 21;
the applicant’s child of any age who is blind or disabled.

States must also have a process for waiving the limit in cases of demonstrated hardship.

What being over the limit means

Being over the home equity limit does not mean:

the person must sell the home;
the person loses all Medicaid. They may still qualify for other Medicaid services, such as doctor visits or hospital care, if otherwise eligible.

It does mean:

Medicaid will not pay for nursing home care, home and community-based waiver services or other long-term care while the equity is above the limit.

So the person must either pay privately for long-term care, reduce the equity or qualify for an exception.

Ways to bring equity under the limit

1. A home equity loan or line of credit

Borrowing against the home reduces equity, dollar for dollar. The loan proceeds are not income in the month received, but any money left in the bank the next month is a countable asset. So a loan is usually paired with a plan for using the money: paying for care, paying debts, home repairs or other allowed purchases.

2. A reverse mortgage

A reverse mortgage lets a homeowner 62 or older borrow against the home with no monthly payments while they live there. The debt grows over time, reducing equity. Reverse mortgages generally require the borrower to live in the home, so they are usually used before a permanent nursing home move or for someone receiving care at home. Loan payments are generally not income, but money that builds up in the bank counts as an asset.

3. Transfer part of the home to a spouse

A transfer to a spouse is not penalized. But if a spouse lives in the home, the equity limit does not apply in the first place.

4. Exempt transfers to certain relatives

Federal law allows the home to be transferred without penalty to:

a spouse;
a child under 21, or a blind or disabled child;
a sibling who has an equity interest in the home and lived there for at least one year just before the applicant went into an institution;
a child who lived in the home for at least two years just before the applicant went into an institution and provided care that let the applicant stay home.

See Sibling exemption and Child caregiver exemption.

5. Sell the home

Selling at fair market value is not a transfer. But the proceeds are a countable asset. Selling turns an excess-equity problem into an excess-asset problem, which then must be planned. See Selling the home.

6. Ask for a hardship waiver

If the person cannot reduce the equity, for example because the home cannot be borrowed against or sold, the state may grant a hardship waiver. Each state sets its own process.

Transfers within the look-back

Giving the home, or part of it, to children who are not covered by an exemption is a transfer for less than fair market value. If done within the five-year look-back, it causes a penalty period. A partial transfer, such as adding a child to the deed, is a transfer of the share given. See Deeding a home to family.

How the home is valued

States generally use one of these to set market value:

the tax assessed value, sometimes adjusted by a ratio;
a professional appraisal;
a broker’s market analysis.

If you believe the state’s value is too high, get a professional appraisal. A lower, well-supported value may bring the equity under the limit. Keep the appraisal with the Medicaid file, and update it if the state questions the value at renewal.

A worked example

Margaret, 84, is widowed and lives alone in a home worth $1,050,000, with no mortgage. She needs nursing home care. Her state uses the $752,000 limit.

Her equity is $1,050,000, which is $298,000 over the limit.
No spouse or protected child lives with her.

Options her family considers with a planner:

A home equity line of credit of about $300,000, drawn as needed to pay for care. Her equity drops under the limit as soon as the debt is in place.
Selling the home and planning the proceeds.
Checking whether her daughter, who has lived with her for three years and provided care, qualifies for the child caregiver exemption. If so, the home can be transferred to the daughter without penalty, and the equity limit stops mattering.

They confirm that the daughter qualifies, with records from Margaret’s doctor. The home is transferred to the daughter, and Margaret applies.

Equity, estate recovery and the home

Even when the home is under the equity limit, it may be subject to estate recovery after the person dies. Federal law also allows liens on the home of a person permanently in a nursing home, with protections for certain relatives. See Estate recovery.

Common questions

Does the limit apply to assisted living or home care? Yes. It applies to all long-term care services paid by Medicaid, including home and community-based waiver services.

What if the home’s value goes up after I’m approved? The state may check at renewal. Report big changes and get advice.

Can I give my home to my son to get under the limit? Only without penalty if he fits one of the exemptions. Otherwise, it is a transfer subject to the look-back.

Does a mortgage count against the equity? Yes. Mortgages, home equity loans and other liens reduce equity.

What if the home is owned jointly with my brother? Only your share counts. If your brother lived there for a year before you entered care, the sibling exemption may also apply.

Getting advice

Excess home equity is one of the most expensive problems in Medicaid planning today. A Certified Medicaid Planner (CMP) can compare loans, sales, exemptions and waivers and help choose the safest route.

Steps to take if you may be over the limit

Get a realistic value. Pull the latest tax assessment and, if the number is close, order an appraisal.
List all debts against the home with current balances: mortgage, home equity loans, liens.
Find your state’s limit for the year you apply.
Check who lives in the home. A spouse, a child under 21 or a blind or disabled child makes the limit irrelevant.
Check the exemptions for a caregiver child or a sibling.
Compare the options above, including their tax and family effects, before signing anything.
Keep records of every step, including any loan documents and appraisals, for the application.

The 2028 change

When the $1,000,000 cap takes effect on January 1, 2028, states that now use limits above $1,000,000 will have to lower them. People already on Medicaid with equity between $1,000,000 and their state’s current limit may be affected at renewal. How states will handle existing cases is not yet clear. Families in those states who expect to need care in the next few years should plan for the lower figure now, while more options remain open and before a health crisis forces a rushed decision.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.