Tithing, Gifts Received and Other One-Time Money

Most income is regular: Social Security, a pension, rent. But people applying for or receiving Long-Term Care Medicaid also get irregular money: a birthday check from a grandchild, a tax refund, an inheritance, a settlement, the sale of a car. Others regularly give money away, for example to their church. Each of these has its own rules. This guide explains how one-time money is treated, what happens to money the person gives away, including tithing, and how to avoid surprises.

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

The basic rule: income in the month received, an asset after

Under the SSI rules most states follow:

money received is income in the month it arrives;
whatever is left on the first day of the next month is an asset.

So a $5,000 gift received in May is income in May. If $5,000 is still in the bank on June 1, it is a countable asset. If the person’s assets are near the $2,000 limit, that can cost them Medicaid.

Gifts received

Cash gifts to the person, from family or friends, generally count as unearned income in the month received. In-kind gifts, such as clothing, generally do not count as income under current SSI rules, because clothing is not counted. Gifts of food are not counted since September 30, 2024. Shelter provided free of charge can count.

Small, irregular amounts: SSI excludes small amounts of irregular income, up to $60 of unearned income in a calendar quarter, or $30 of earned income. Larger or regular gifts count.

Family members who want to help a loved one on Medicaid should usually pay providers directly, such as paying for clothing or a hairdresser, rather than giving cash. Payments to third parties for things other than food or shelter are generally not income to the person.

Tax refunds

Federal tax refunds are excluded from income and, for 12 months, from resources, for federal means-tested programs including Medicaid. State tax refunds may be treated differently. Federal refundable credits are excluded the same way.

Inheritances

An inheritance counts as income in the month received and as an asset the next month. A person on Medicaid must report it, and it can end eligibility until spent down or planned. See Inheritance.

Settlements and awards

Personal injury settlements, lawsuit awards and lottery winnings generally count as income in the month received. Some settlements can be placed in a special needs trust or a pooled trust. Get advice before the money is paid. See Special needs trusts.

Sales of assets

Money from selling an asset the person already owns, such as a car or stocks, is not income. It is a conversion of one asset into another. But the proceeds are a countable asset unless excluded.

Lump-sum back payments of Social Security or SSI are excluded from resources for nine months after the month received, under SSI rules. They do count as income in the month received for some Medicaid groups, depending on state rules.

Tithing and charitable giving

Many people have tithed or given to charity their whole lives. Medicaid rules can conflict with that habit.

Before applying: the look-back

Gifts to a church or charity made within the five-year look-back are transfers for less than fair market value, just like gifts to family. They can cause a penalty period. There is no general exemption for religious or charitable giving. See The five-year look-back.

Small, regular donations consistent with a lifelong pattern are sometimes accepted by states as normal, but there is no guarantee. Larger donations in the years before applying are a frequent problem.

After approval: patient liability

Once a person is on Medicaid in a nursing home, most of their income goes toward the patient liability. Tithing is not one of the allowed deductions. A person who wants to give can generally use only their personal needs allowance, which is small.

Married couples

The spouse at home can give from their own income without affecting the applicant, after eligibility. But at the snapshot date and during the look-back, the spouse’s gifts count as the couple’s transfers.

Reporting one-time money

People on Medicaid must report changes in income and assets, usually within 10 days or by the next renewal, depending on the state. Failing to report a gift, inheritance or settlement can lead to an overpayment claim or loss of coverage. When in doubt, report it.

A worked example

Agnes, 88, is on Medicaid in a nursing home, with $1,600 in her bank account. In March:

her grandson sends her $500 for her birthday;
she receives a $300 federal tax refund;
a cousin dies and leaves her $3,000.

Results:

The $500 is income in March, counted in the patient liability.
The $300 tax refund is excluded from income and from assets for 12 months.
The $3,000 inheritance is income in March. If kept, it is an asset on April 1, pushing her over the limit.

Her family helps her spend the inheritance on allowed items in March, such as a prepaid funeral contract and new hearing aids, and reports it to the state.

Common questions

Can my children give me money while I’m on Medicaid? It counts as income. It’s better to pay providers directly for things you need.

Can I give $100 to my church each month while on Medicaid? Only from your personal needs allowance.

Is my tax refund countable? Federal refunds are excluded for 12 months.

What about money from selling my car? It’s an asset, not income.

Is a birthday card with $20 a problem? Very small irregular gifts may be excluded. Report anything larger.

Getting advice

Before receiving an inheritance or settlement, talk with a Certified Medicaid Planner (CMP). Planning before the money arrives often keeps more of it for the person’s benefit.

Gifts to the person from a spouse

Money a spouse gives the applicant is not a problem in itself, since spouses’ assets are counted together at the snapshot date anyway. After eligibility, though, money the spouse at home gives the person on Medicaid counts as that person’s income or assets. Keep the spouses’ money separate after approval.

Loans

A genuine loan to the person is not income, because it must be repaid. To be treated as a loan, it should be in writing, with repayment terms, and be enforceable. Money called a “loan” with no real expectation of repayment may be treated as a gift and counted as income.

Refunds and rebates

Refunds of money the person already paid, such as an overpaid utility bill or a returned purchase, are generally not income. They return the person’s own money. A refund of a nursing home deposit or an insurance premium is the same. But whatever is left over at the start of the next month counts as an asset.

Insurance proceeds

Insurance payments to repair or replace an excluded asset, such as a home damaged by fire, are generally excluded for a period while the repair or replacement takes place. Payments for medical care, made to the provider, are not income. Life insurance proceeds paid to the person as a beneficiary count as income in the month received.

Gifts made from the personal needs allowance

A nursing home resident on Medicaid can give small gifts from their personal needs allowance, such as birthday cards for grandchildren or a modest church offering. Because this money is the person’s to spend, these small gifts are generally not treated as penalized transfers. Large gifts from savings are a different matter.

Keeping a simple log

Families helping a loved one should keep a running list of every irregular payment in and out: date, amount, source or recipient and what was done with it. At renewal, this list answers most of the caseworker’s questions and avoids delays.

Lump sums and the special income limit

In states that use the $2,982 special income limit, a large one-time payment can push the person over the income cap for that month. Some states disregard infrequent payments for this test; others count them, which can mean losing Medicaid for one month, or needing to deposit the excess into a Miller trust. Ask how your state handles a one-time spike before it arrives, and keep the paperwork showing it was a single payment. See Miller trusts.

Selling personal belongings

Selling a piece of jewelry, furniture or a collection is a conversion of an asset, not income. The sale price should be fair. Selling a valuable item to a relative for a token price is treated as a gift of the difference, which falls under the look-back. Keep a record of the item, its value and the sale.

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