Will I Lose My Medicaid If I Sell My House?

Medicaid is a public health insurance program that provides healthcare coverage to millions of individuals in the United States, particularly those with limited income and resources. This needs-based program is especially important for covering the substantial costs associated with long-term care, such as nursing home stays or in-home care services. Eligibility for Medicaid hinges on meeting specific financial criteria, including limits on both income and countable assets. A common concern for many beneficiaries, or those considering applying, is how selling a significant asset like a home might affect their ongoing eligibility. This article clarifies the rules surrounding home ownership and its impact on Medicaid benefits.

Medicaid Eligibility and Assets

Medicaid eligibility is determined by evaluating an applicant’s financial resources, categorized as either “countable” or “exempt” assets. Countable assets are those available to pay for healthcare costs and count towards eligibility limits. These typically include cash, funds in checking and savings accounts, certificates of deposit, stocks, bonds, mutual funds, and non-homestead real estate, such as a second home or rental property. Retirement accounts like IRAs and 401(k)s may also be considered countable assets in some states, particularly if they are not in payout status.

Conversely, exempt assets are those that Medicaid does not count against the eligibility limits, allowing applicants to retain them. Common examples of exempt assets include personal belongings and household goods like furniture, clothing, and jewelry. One automobile is generally exempt if it is used for transportation by the applicant or a household member. Additionally, certain prepaid funeral arrangements and burial funds, often up to a specified limit, are typically exempt.

Asset limits for Medicaid vary significantly by state and by the specific program, such as regular Medicaid versus long-term care Medicaid. For individuals applying for long-term care Medicaid, the asset limit in most states is typically set at $2,000 for a single applicant. For married couples, different rules apply, with a non-applicant spouse often allowed to retain a higher amount of assets under the Community Spouse Resource Allowance, which can be up to $157,920 in most states in 2025.

Your Home and Medicaid Eligibility

A primary residence is generally considered an exempt asset for Medicaid eligibility purposes, particularly for long-term care. This exemption applies if the Medicaid applicant lives in the home, or if their spouse or a dependent child resides there. The home can include a house, condominium, mobile home, or even a houseboat.

Even if the Medicaid applicant moves into a nursing home, the primary residence can often remain exempt under specific conditions. If a spouse, minor child (under 21), or a blind or disabled child of any age continues to live in the home, it remains exempt without any equity limit. Another common condition for exemption is if the applicant demonstrates an “intent to return” home. This signifies the individual plans to move back if their health improves. Many states honor this intent, although some may impose time limits on how long the home remains exempt under this rule, typically ranging from six to twelve months.

For single applicants, or if no qualifying family member lives in the home, a home equity limit usually applies for long-term care Medicaid. If the equity interest in the home exceeds this limit, the home may become a countable asset. In 2025, these federal limits typically range between $730,000 and $1,097,000, depending on the state. Some states, however, do not impose a home equity limit at all, such as California.

Selling Your Home and Medicaid

When a primary residence is sold, the proceeds from the sale generally convert from an exempt asset into a countable asset. This conversion can significantly impact Medicaid eligibility, as the lump sum of cash received often pushes the individual’s assets over the program’s strict limits. For instance, if a home is sold for several hundred thousand dollars, and the Medicaid asset limit for a single individual is $2,000, the sale proceeds would make the individual ineligible for benefits.

If the sale proceeds exceed the Medicaid asset limit, the individual typically enters a “spend-down” period. This means they must use the excess funds on allowable expenses until their countable assets fall below the limit again.

Allowable spend-down items generally benefit the applicant directly or convert countable assets into exempt ones. Examples include paying off existing debts like mortgages, credit card balances, or car loans. Funds can also be used for necessary home improvements, such as installing wheelchair ramps or making bathroom modifications, or for purchasing a new exempt residence. Other qualifying expenses include medical bills, health insurance premiums, durable medical equipment, and certain pre-paid funeral arrangements. It is important that these expenditures are made at fair market value and for the direct benefit of the applicant or their spouse.

Transferring the proceeds from a home sale to other individuals, such as family members, has significant implications due to Medicaid’s “look-back period.” This period, typically 60 months (five years) preceding the date of a Medicaid application, is a review period during which all financial transactions are scrutinized. Any uncompensated transfers or gifts made during this time are presumed to have been made to artificially reduce assets to qualify for Medicaid. If such transfers are identified, a penalty period of Medicaid ineligibility is imposed, meaning the individual will not receive benefits for a specific duration, leaving them responsible for their care costs. The length of this penalty period is calculated by dividing the amount transferred by the average monthly cost of nursing home care in the state.

While the home may be exempt during the applicant’s lifetime, states can seek reimbursement for Medicaid-funded long-term care costs after the recipient’s death through the Medicaid Estate Recovery Program (MERP). The home is often the most significant asset in an estate, and MERP allows states to recover costs from its value.

Reporting Changes to Medicaid

Individuals receiving Medicaid benefits are legally required to report any significant changes in their financial situation to their state Medicaid agency. This includes the sale of a home and the receipt of its proceeds. Accurate and timely reporting is important to maintain eligibility and avoid penalties.

When a home is sold, beneficiaries must inform their local Medicaid office about the date of the sale, the total amount of the proceeds received, and how those funds are being used. This transparency allows the agency to reassess eligibility based on the new asset levels. The timeframe for reporting these changes is typically specific, often within ten days of the change occurring, though this can vary by state.

To report changes, individuals generally need to contact their state or local Medicaid office directly. This may involve submitting specific forms, providing documentation of the sale, and detailing how the proceeds have been spent or are being held. Adhering to these reporting requirements is important, as failure to report significant financial changes can lead to a loss of Medicaid benefits, a period of ineligibility, or legal consequences.