What Counts as Income?

Long-Term Care Medicaid looks closely at an applicant’s income. In many states, income must be under a monthly limit to qualify. And after approval, most of a nursing home resident’s income goes toward the cost of care. This guide explains what Medicaid counts as income, how it is measured, and the rules that trip people up.

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

Income vs. assets

Medicaid treats income and assets separately:

• Income is money (or something of value) that comes in during a month, such as a Social Security check, a pension payment or interest.
• Assets are what a person owns at a point in time, such as bank balances or property.

Money received is income in the month it arrives. Whatever is left on the first day of the following month counts as an asset. See What counts as an asset?.

Earned and unearned income

Medicaid divides income into two types.

Earned income comes from work: – wages and salaries; – self-employment income (net earnings); – royalties and honoraria from work the person did; – payments from sheltered workshops.

Unearned income is everything else: – Social Security retirement and disability benefits; – Supplemental Security Income (SSI), where counted; – pensions and annuity payments; – distributions from IRAs and 401(k)s; – interest and dividends; – rental income (usually net of allowed expenses); – VA pensions and compensation (with some exclusions); – railroad retirement and veterans benefits; – alimony and support payments; – unemployment benefits; – payments from trusts; – cash gifts and some prizes, in the month received.

The difference matters because earned income gets bigger disregards. See Income disregards.

Gross income, not take-home pay

For Long-Term Care Medicaid, states generally look at gross income: the amount before deductions such as Medicare premiums, tax withholding or insurance premiums.

For example, a person’s Social Security statement might show a benefit of $2,100 a month, with $202.90 deducted for the Medicare Part B premium (the 2026 standard premium), for a deposit of $1,897.10. Medicaid counts the $2,100, not the deposit.

This is one of the most common surprises for families: a person whose deposits are below the income limit may still be over it on a gross basis.

The “name on the check” rule

For married couples, income generally belongs to the spouse whose name is on the check. A pension paid to the husband is his income; a Social Security check paid to the wife is hers. Joint income, such as interest from a joint account, is usually split equally.

This matters because the spouse at home’s income is not counted toward the applicant’s eligibility. See Income for couples.

Regular income and one-time income

• Regular income (monthly Social Security, a pension) is counted each month.
• Irregular or one-time income (an inheritance, a lump-sum payment, a lottery win) is usually counted as income in the month received. Whatever is left the next month becomes an asset, which can push a person over the asset limit.

Some lump sums are treated differently. For example, retroactive Social Security or SSI payments are excluded as assets for a limited time under federal rules.

In-kind income

Under SSI-based rules, receiving food or shelter from someone else for free can count as “in-kind” income in some situations. For people in nursing homes on Medicaid, this rarely matters. It can matter for people applying for home care waivers. As of September 30, 2024, the SSI program no longer counts food as in-kind support, and states that follow SSI rules may apply the same change.

How income is used in Long-Term Care Medicaid

1. To decide eligibility

States use one of two broad approaches:

• Income cap states. Income must be at or below a set limit, most often $2,982 a month in 2026 (300 percent of the $994 federal SSI benefit). People over the cap may need a Qualified Income (Miller) Trust.
• Medically needy states. There is no fixed cap for nursing home care. A person qualifies if their income is less than the cost of their care, after allowances.

See Income limits by state.

2. To figure what the person pays

After approval, most of the person’s income goes to the nursing home as their patient liability, after a personal needs allowance, any allowance for a spouse at home, and certain health insurance premiums. See Patient liability.

Common income sources and how they are counted

Reporting income

Every source of income must be reported on the application and at renewal. Caseworkers usually ask for:

• the current year’s Social Security award letter;
• pension and annuity statements showing gross amounts;
• recent bank statements showing deposits;
• tax returns, in some cases.

After approval, changes in income must usually be reported within a short time, often 10 days.

Common questions

Is my Medicare premium subtracted? Not when deciding eligibility in most states. Health insurance premiums are subtracted later when figuring patient liability.

Does my spouse’s income count? Not toward your eligibility. See Income for couples.

What if my income is just over the limit? In income cap states, a Qualified Income (Miller) Trust can often solve the problem. Setting one up correctly matters, and many families get help from a Certified Medicaid Planner (CMP) working with an attorney.

A worked example

Walter, 82, is applying for nursing home Medicaid in a state with a $2,982 income cap. His income each month:

His bank deposits add up to less, because the Medicare premium and tax withholding are taken out first. But Medicaid counts the gross amount: $2,842. That is under the $2,982 cap, so Walter meets the income test. If his pension were $950 instead, his gross income would be $3,012, over the cap, and he would need a Qualified Income (Miller) Trust in his state.

Income that changes during the year

Income is not always steady. Common changes:

• Social Security cost-of-living increases each January can push someone who was just under the cap over it.
• Required minimum distributions from retirement accounts may be taken once a year; states differ on whether they count them in the month received or spread them over the year.
• Quarterly dividends or interest may arrive only some months.
• Pension changes after a spouse’s death, such as a survivor benefit starting.

It is wise to look ahead. Someone a few dollars under the cap may need to plan for January.

Getting income right

Income mistakes are common because so many numbers are involved: gross versus net, monthly versus yearly, the applicant’s versus the spouse’s. Counting income wrong can lead to a denial, an incorrect patient liability or a missed allowance for the spouse at home. A {L} can review income sources and help make sure the numbers on the application are correct.

Income that is easy to overlook

Some kinds of income are easy to miss when an application is prepared:

• Small pensions from a former employer, including a pension from a job held decades ago.
• Annuity payments, which may be paid monthly, quarterly or yearly.
• Interest and dividends on accounts and investments.
• Rent from a room, an apartment or farmland.
• Payments on a loan the applicant made to someone else.
• Royalties or payments from mineral rights.

Each of these should be listed on the application with proof of the amount. Missing income can delay approval or lead to an overpayment later.

Bank statements are a good place to find forgotten income, because most regular payments show up as deposits.

Related guides

• Income that does not count (disregards)
• Income limits by state
• Patient liability
• Income for couples
• State guides

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