Rental Income

Rent from a house, apartment, farmland, a room in the home or a storage building is income for Long-Term Care Medicaid. What counts is usually the net rent, after the ordinary costs of owning and running the property. This guide explains how rental income is figured, how it affects eligibility and the monthly payment toward care, and what records to keep.

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

Two separate questions

When a person owns rental property, Medicaid looks at it twice:

The property is an asset. Rental property usually counts, unless it is used in a trade or business or falls within a small exclusion. See Owning rental property.
The rent is income. It counts toward income limits and, after approval, toward the patient liability.

This guide covers the second question.

Net rental income

Under the SSI rules most states follow, rental income is figured after deducting the ordinary and necessary expenses of managing and maintaining the property, in the month they are paid. Allowed expenses generally include:

property taxes;
insurance;
repairs and maintenance;
utilities paid by the owner;
interest on the mortgage;
advertising and management fees;
lawn care, snow removal and similar upkeep.

Expenses generally not deducted:

Mortgage principal. Paying down the loan builds equity; it is not an expense.
Depreciation. Under SSI rules, depreciation is not deducted for nonbusiness rental income.
Capital improvements, such as a new roof or addition, in some states.

	Example
Rent received	$1,500 a month
Property taxes and insurance	$350
Mortgage interest	$250
Repairs	$100
Net rental income	$800

Mortgage principal, say $300 a month, would not reduce the $800.

Unearned or earned?

For most people, rent is unearned income. If the rental activity is a trade or business, rent is treated as net earnings from self-employment, which uses the self-employment rules. See Business and self-employment income.

How rental income affects eligibility

States with an income cap

Many states compare gross monthly income with the $2,982 special income limit (2026). For rental income, “gross” is generally the net rental figure, after expenses, added to other gross income such as Social Security and pensions.

If the total is over the cap, the state may require a Qualified Income Trust. See Miller trusts.

Medically needy states

States with a medically needy pathway let people qualify by spending income on medical costs. Rental income counts toward the spend-down. See Income spend-down.

Rental income and patient liability

Once eligible, a nursing home resident pays nearly all their income toward care, after allowed deductions. Net rental income is part of that income. Because net rent can change month to month, states may average it, or adjust the liability as expenses change. Keep the state informed of big changes, such as losing a tenant.

Renting a room in the home

If the person rents a room in the home to a boarder or roomer:

Rent from a roomer (room only) is generally treated as rental income, after expenses.
Rent from a boarder (room and meals) is figured differently, with deductions for the cost of food and other costs.

Rent paid by a relative who lives in the home is also rental income if it is a real rental arrangement.

Jointly owned rental property

Income from jointly owned property is generally divided according to ownership. If the person owns half, half the net rent counts. Keep separate records for each owner’s share.

Married couples

In most states, rent paid to the spouse at home in that spouse’s name belongs to that spouse and does not count toward the applicant’s eligibility. Rent from property owned by both spouses is usually split in half. The spouse at home’s rental income still matters when figuring the income allowance, which tops up the spouse’s own income. See Raising the spousal allowances.

A worked example

Marian, 84, owns a duplex. She lives in one unit and rents the other for $1,200 a month. She pays $3,600 a year in taxes, $1,200 in insurance and about $1,200 in repairs, and has no mortgage. She enters a nursing home.

Her duplex unit is her home and may be exempt while she intends to return. The rental unit may be countable, depending on state rules for a two-unit home.
Expenses on the rental unit: half of $6,000 = $3,000 a year, or $250 a month.
Net rental income: $1,200 – $250 = $950 a month.
With her $1,350 Social Security, her gross income is $2,300, under the $2,982 cap.

After approval, her patient liability includes the $950.

Records to keep

leases;
a monthly ledger of rent received;
receipts for every expense;
property tax bills and insurance statements;
mortgage statements showing interest and principal;
tax returns with Schedule E.

Without records, a caseworker may count the full rent with no deductions, which raises the monthly payment.

Common questions

Does depreciation reduce my rental income? Not under SSI rules for nonbusiness rental property.

What if the tenant stops paying? Report it. Rent counts when it is received, so unpaid rent is not income, but keep a record.

Can I charge my daughter less rent? You can, but below-market rent may affect how the property is counted and may raise transfer questions.

What if expenses exceed rent? Net rental income is then zero for that month. A rental loss generally does not reduce other income.

Getting advice

A Certified Medicaid Planner (CMP) can help decide whether keeping a rental makes sense and how the rent will affect eligibility and the monthly payment.

How the SSI rules compute net rent, month by month

The SSI manual sets out a precise method that many state Medicaid agencies follow:

Work month by month. Subtract deductible expenses paid in a month from the gross rent received in that same month.
Expenses count when paid, not when the bill arrives.
Excess expenses carry forward. If expenses in a month exceed the rent, the excess is subtracted from the next month’s rent, and so on until the end of the tax year. If some excess is still left, it can be applied back to earlier months of the same tax year.
No carryover across tax years, and excess expenses cannot offset other income such as Social Security.
Estimates for the future use past records, deducting only predictable expenses such as utilities, interest and taxes. An unexpected repair is deducted in the month it is paid.
Refunds of an expense, such as a property tax refund, lead to a recalculation.

Example: A tenant moves out in September. The owner keeps paying the mortgage interest and utilities in September and October with no rent coming in. Those months show no rental income, and the unused expenses are carried into November, when a new tenant begins paying.

Security deposits

A tenant’s security deposit is not income to the owner while it may have to be returned. If the owner uses the deposit to pay for damage or unpaid rent, it becomes income at that point.

Two-unit and multi-unit buildings

When the owner lives in part of a building and rents the rest, expenses for the whole building are prorated:

If the units are about the same size, by the number of rental units compared with total units.
If they differ in size, by the number of rooms in the rental units compared with the total rooms.

Expenses that relate only to the rental unit, such as a repair inside it, are deducted in full from that unit’s rent.

For a room rented inside a single home, expenses are prorated by the number of rooms rented compared with the rooms in the house. Bathrooms are not counted, and basements and attics count only if finished as living space.

Joint owners

Unless there is evidence to the contrary, net rental income is divided equally among the owners. If one owner pays all the expenses, that owner deducts them from their own share of the rent. A signed statement explaining an unequal arrangement may be accepted.

When records are missing

Receipts and bank statements are the best proof of rent and expenses. If records are missing, the SSI rules allow a signed statement explaining why and stating the rent and expenses for the period. A recent federal tax return with Schedule E also helps estimate future rental income. Caseworkers do not normally contact tenants to check the amounts. Even so, rebuilding records from bank statements is better than relying on a statement, because states can be stricter than SSI.

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