Selling the Home While Applying or on Medicaid

For many families, the home is the largest asset. While a person lives there, or intends to return, the home is usually exempt for Long-Term Care Medicaid. Selling it changes everything: an exempt asset becomes cash, and cash counts. A sale at the wrong time can end eligibility overnight. A sale planned well can pay for care, protect a spouse and still leave room for the person to qualify. This guide explains how a home sale is treated before applying, during the application and after approval, and how to plan.

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

Why the sale matters

The home is generally an exempt asset when:

the person lives there;
the person is away, such as in a nursing home, and intends to return (in most states);
a spouse or dependent relative lives there.

See When the home is exempt and Intent to return home.

Once the home is sold, the proceeds are countable. A person with $2,000 in the bank who sells a home for a net $300,000 will have $302,000 of countable assets.

Selling at fair market value

A sale at fair market value is not a transfer and causes no penalty. The person has simply exchanged one asset for another. The state may ask for:

the closing statement (settlement statement);
the sales contract;
an appraisal or market analysis, if the price looks low;
proof of where the proceeds went.

Selling below value

Selling the home for less than it is worth, whether to family or anyone else, is treated as a gift of the difference. A home worth $300,000 sold to a son for $150,000 is a $150,000 transfer, which causes a penalty if within the five-year look-back. See The five-year look-back.

Timing: before applying

If the person sells the home before applying:

The proceeds count as assets on the first day of the month after the sale.
They can be spent down on allowed purchases and care. See Allowed spend-down.
For a couple, the proceeds count at the snapshot date if still held then. See The snapshot date.

Families sometimes sell the home to pay for care for a few years, then apply when the money runs out. That is a legitimate plan, but it may give up options that would have protected the home.

Timing: during the application

A sale during the application can be complicated:

If the sale closes before approval, the proceeds will be counted, and the person may be over the limit for the months after the sale.
The application may have to be updated or withdrawn and refiled.
The look-back still applies to any money given away.

Tell the caseworker about a pending sale.

Timing: after approval

If a person on Medicaid sells the home:

The proceeds are countable starting the next month.
The person will likely become ineligible until the proceeds are spent down to the limit.
The state must be told. Most states require reporting changes within a short period, often 10 days.
The money can be used to pay the nursing home privately, to buy allowed items, or for other planning, after advice.

Some states may also expect repayment of benefits paid while the home was exempt, or may have placed a lien on the home. See below.

Selling when the home was listed and unsold

Under SSI rules, real property that the person is making reasonable efforts to sell may be excluded while it is on the market. Many states follow this rule for Medicaid. Reasonable efforts mean listing at a fair price with a broker or advertising, and accepting reasonable offers. The state may require the person to sign an agreement to repay benefits from the sale.

Using the proceeds to buy a new home

Under SSI rules, proceeds from selling an exempt home are excluded if used to buy another home within three months. This can help a person who moves to a smaller home, or a couple where the spouse at home downsizes. Some states follow this rule.

Liens and estate recovery

Federal law allows a state to place a lien, often called a TEFRA lien, on the home of a person who is permanently institutionalized, with exceptions. If the home is sold while the lien is in place, the state may require repayment from the proceeds. No lien may be placed if the home is occupied by:

a spouse;
a child under 21 or a blind or disabled child;
a sibling with an equity interest who lived in the home for at least a year before the person entered the institution.

Not every state uses TEFRA liens. See Estate recovery.

Married couples

When one spouse is in a nursing home and the other lives at home:

The home is exempt while the spouse at home lives there.
After the person on Medicaid is approved, the home can be transferred to the spouse at home without penalty.
The spouse at home can then sell the home. After approval, the spouse at home’s assets generally do not affect the institutionalized spouse’s eligibility.

Transferring the home to the spouse at home before selling is a common, useful step. Get advice on how and when.

Taxes

The federal capital gains exclusion lets a homeowner exclude up to $250,000 of gain ($500,000 for a married couple filing jointly) if they owned and lived in the home for two of the past five years. A person who moved to a nursing home may still qualify in some cases, because time in a care facility can count toward the use test if the person lived in the home for at least one year in the five years before the sale and became unable to care for themselves. Get tax advice before selling.

A worked example

Ruth, 86, entered a nursing home a year ago and is on Medicaid. Her home is exempt because she intends to return. Her doctor now says she will not be able to go home. Her children want to sell the house for $280,000.

The family tells the caseworker about the planned sale.
The house sells at fair market value, netting $260,000.
The next month, Ruth’s countable assets are $262,000, and Medicaid stops.
The family uses the proceeds to pay any debts, buy an irrevocable funeral contract and pay the nursing home privately.
A planner reviews other options in her state.
When her assets are back under $2,000, she reapplies.

If Ruth had a TEFRA lien on the home, the state would have been repaid from the sale first.

Common questions

Do I have to sell my home to get Medicaid? Usually not, if the home is exempt.

Can I sell my home to my daughter? Yes, at fair market value. A discount is a gift.

Will I lose Medicaid if I sell? Probably, until the proceeds are spent down.

Can I give the proceeds to my children? That is a transfer, and penalties apply within the look-back.

What if I sell to pay off the nursing home? Paying the nursing home at the private rate is an allowed use of the money.

Getting advice

Before listing a home, talk with a Certified Medicaid Planner (CMP). The order of steps can mean the difference between protecting much of the home’s value and losing it.

A checklist before listing

Confirm the home’s current status. Is it exempt now, and why?
Check for a lien recorded by the state.
Get a fair value from an appraisal or a broker’s analysis.
Estimate the net proceeds after the mortgage, selling costs and taxes.
Decide what the proceeds will be used for before the closing, so the money can be spent or planned the same month.
Plan the reporting. Know who will notify the caseworker and when.
Keep the paperwork: listing agreement, contract, closing statement and receipts for every use of the proceeds.

Who signs for the seller?

A person in a nursing home may be unable to sign closing documents. An agent under a durable power of attorney that covers real estate can usually sign. Without one, the family may need a court-appointed guardian or conservator, which adds cost and months of delay. See Power of attorney.

Moving expenses and the next home

A sale often goes with a move. Reasonable moving costs, a security deposit on an apartment for the spouse at home, and furnishings for a new home are generally allowed uses of the proceeds. Keep receipts. Money spent on these real needs is not a gift.

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