How Does Medicaid Treat Business Income?
Owning a Business & Medicaid – Quick Facts
Yes—if the business meets Medicaid’s exemption rules for “property essential to self-support.”
They can be exempt regardless of value if actively used and necessary to produce income.
Income is counted, but allowable business expenses can lower “countable” income.
Business description, list of assets, years in operation, ownership, and recent tax returns.
Yes—some cap exemptions or set specific “active use” and resumption timelines.
Spend-downs and MAPTs (set up early) can preserve eligibility. Get pro guidance.
Can you own a business and still get Medicaid long-term care?
Yes—you can own and operate a business and still qualify for Medicaid if your business assets are essential to self-support, you (or your spouse) are actively involved in operations, and—if paused—there’s a reasonable plan to resume within the state’s allowed window.
Which business assets can be treated as exempt?
States often refer to these as “business property essential to self-support” or “trade property.” Examples include:
- Real property: farmland, buildings, and fixed structures used by the business.
- Personal property: tools, machinery, inventory, livestock, vehicles, office gear, computers.
- Operational cash: liquid funds/accounts required to run the business.
How is income from a business counted?
Business income is included when evaluating Medicaid income eligibility, but ordinary and necessary business expenses can be deducted to reduce “countable” income—unlike most passive rental income rules.
What asset limits matter before exemptions are applied?
In 2025, many states cap a single applicant’s countable assets at $2,000 (e.g., CT $1,600; IL $17,500; CA no limit). For married couples, limits depend on program and whether one or both spouses apply. The at-home spouse may retain up to $157,920 via the CSRA.
When do business assets become fully exempt?
Must the assets be essential to self-support?
Yes. The assets must be necessary to operate your trade/business and generate income.
Do you have to be actively involved in the business?
Usually yes—most states require the applicant or spouse to be engaged in ongoing operations; some specify day-to-day participation.
What documentation should you expect to provide?
States commonly request a business description, asset list, years in operation, co-owners, and the current or most recent tax return (or financials estimating gross and net earnings).
What practical examples make this clearer?
Home-Based Pottery—Exempt
Margaret’s kiln, wheel, tools, and clay (~$10,000) are exempt because she actively runs the business.
Family Farm—Exempt
William continues to operate the farm after his spouse enters care, so equipment and livestock remain exempt.
Mechanic’s Garage—Exempt
Ralph’s lot, shop, and tools are exempt as actively used business property.
What if the business is temporarily not operating?
Many states keep assets exempt if you reasonably expect to resume within 12 months (often up to 24 months when a disabling condition caused the pause). Seasonal businesses typically remain exempt off-season if they will reopen next season.
How do state rules differ in key ways?
- Exemption value limits: Some states (e.g., Illinois) cap equity and require a minimum rate of return; most don’t cap value if assets are essential/active.
- Active-use standard: Several states require day-to-day participation; others allow exemption even if the owner isn’t personally active so long as the business is operating.
- Resumption windows: Many use 12 months (up to 24 if disabling); a few don’t set a hard cap.
What can you do if business assets push you over the limit?
Could you sell assets and spend down lawfully?
Yes—sell at fair market value and spend on non-countable items (e.g., home repairs, safety modifications, Irrevocable Funeral Trusts, needed care). Avoid gifts/under-value sales that violate the 60-month Look-Back.
Could a Medicaid Asset Protection Trust help?
Potentially. A properly structured, irrevocable MAPT can remove assets from your countable total and protect them from estate recovery. It must be set up well before applying due to the Look-Back Period.
Who can help tailor a safe plan?
A Certified Medicaid Planner can interpret your state’s rules, document active/business use, and structure spend-downs or trusts to maintain eligibility.
Which state-specific rules should you know about?
Below are selected highlights where states commonly differ. States not listed often follow the general rule: actively used, essential business/trade assets are exempt regardless of value; paused operations may remain exempt if resumption is reasonably expected within 12 months (often up to 24 months if due to a disabling condition). Always confirm with your state Medicaid agency or a Certified Medicaid Planner.
| State | Active Participation Required? | Exemption Value Rule | Resumption Window | Seasonal Business Treatment | Notable Notes |
|---|---|---|---|---|---|
| California | Varies | No overall asset limit (eff. 1/1/24) | N/A | N/A | Business exemptions largely moot due to no asset limit. |
| Illinois | Standard (active use expected) | Cap $6,000 equity & requires ≥ 6% annual return on excluded equity | Typical 12 months (extensions vary) | Not specified | Only the first $6,000 equity can be exempt; return test applies. |
| Iowa | Standard (active use expected) | No value cap if essential/active | Seasonal assets exempt if business resumes within 12 months | Considered operating between seasons | Seasonal operations protected if reopening next season. |
| Missouri | Not strictly required if the business itself is operating | No value cap if essential/operating | Typical 12 months (extensions vary) | Not specified | Exemption may continue even if owner isn’t personally active. |
| Texas | Standard (active use expected) | No value cap if essential/active | No fixed time limit stated for reasonable resumption | Not specified | Open-ended “reasonable expectation” to resume operations. |
| Wisconsin | Day-to-day participation typically required by applicant/spouse | No value cap if essential/active | Typical 12 months (extensions vary) | Still considered operating off-season | Explicit “active participation” standard; seasonal OK between seasons. |
| Indiana, Minnesota, Nebraska, South Dakota | Standard (active use expected) | No value cap if essential/active | 12 months if pause caused by reasons beyond control; extensions may apply when disabling | Not specified | Pause must be due to factors outside the person’s control. |
| Most other states | Standard (active use expected) | No value cap if essential/active | ~12 months; often up to 24 months if disabling | Seasonal typically OK if resuming next season | Confirm local guidance; documentation is key. |
Reminder: Even when business assets are exempt for eligibility, they may still be subject to a state’s Estate Recovery rules after death. Coordinate planning with a Certified Medicaid Planner or elder-law attorney.
