Introduction
Persons must meet asset and income limits in order to qualify for Medicaid long-term care in nursing homes, their own home and assisted living residences. This seems straightforward enough, but some assets require special guidelines, including rental properties. How they impact Medicaid’s asset limit, and income limit, depends on the property’s value, how much rent it generates and the state.

How Rental Properties Impact Medicaid’s Asset Limit

In most states in 2025, the individual asset limit for Medicaid long-term care is $2,000, although this figure can vary by state, Medicaid program and the applicant’s marital status. For example, California has no asset limit, and New York’s is $31,175. And for married applicants with just one spouse applying, the non-applicant spouse is allowed to keep up to $157,920 in the couple’s assets thanks to the Community Spouse Resource Allowance.

While the value of a primary home can be completely exempt from the asset limit in many circumstances, that’s not the case with rental properties. However, up to $6,000 of a rental property’s value can be exempt from the asset limit if the annual income produced by the property is at least 6% of the property’s equity value. To be clear, equity value is the fair market value of the property minus any outstanding debt.

In addition to homes and apartments, rental properties relevant to this discussion can also include:
• Farm land or equipment
• Timber rights
• Forest land (for hunting)
• Storage lots
• Mineral rights (resources that are underground like gas, oil or minerals)

Examples:
1) Anne owns a small lot with an equity value of $7,000. She leases it for vehicle storage for $1,000/year. Since 6% of the lot’s value is $240, the property meets the 6% income requirement for $6,000 of the value to be exempt. Since the lot’s equity value is $7,000, only $1,000 will count toward Anne’s asset limit.

2) Jim owns farmland worth $4,000. He rents it to a family member for just $200/year. Since 6% of the value is $240, the farmland does not meet the exempt criteria and its full value will count toward Jim’s asset limit.

Owning Multiple Rental Properties

For seniors who own multiple rental properties, the 6% income requirement is applied separately to each property. The equity value of all properties that meet the requirement will be added together and a maximum of $6,000 can be exempt from the owner’s asset limit. The entire equity value of any property that doesn’t meet the 6% requirement will be counted toward the asset limit.

Example:
Mary owns two lots that she rents out for boat storage. Lot A has an equity value of $3,000 and is rented out for $500/year, so it meets the 6% requirement because 6% of $3,000 is $180. Lot B has an equity value of $5,000 and is rented for $700/year, so it also meets the 6% requirement because 6% of $5,000 is $300. The combined equity value of the two lots is $8,000. So, $6,000 of that value can be exempt, and $2,000 of it will be counted toward Mary’s asset limit.

Exception to the 6% Income Requirement

There is an exception to the 6% requirement for rental properties. To qualify for the exception, the individual must meet two criteria:

1) The reason the property did not produce 6% of its equity value as annual income is out of the individual’s control.
2) It is reasonable to expect that the property will once again generate a 6% rate of return. The timing for the return to a 6% annual income varies by state, as discussed next.

State Variations

Medicaid’s rules governing rental properties can vary by state. These variations include:

• Timing for return to 6% annual income – In some states, like Texas, the property must be expected to return to producing 6% of its equity value within 18 months, in other states, like Ohio, it is 24 months.

• Exemption amount – Some states will exempt more than $6,000 of rental property equity value from the asset limit. In New York, for example, it’s $12,000. Florida has the most liberal rules in this area and will exempt the full amount of the rental property as long as it generates income similar to other properties in the area.

• Calculation of 6% rate of return – In some states, the income property must produce 6% of its potentially excluded equity value in order to meet the exemption requirement. This only impacts individuals who own property that is worth more than the maximum exemption amount in their state, which is $6,000 in most states. For example, Bill owns a mobile home worth $8,000 and rents it out for $400/year to his son. That’s less than 6% of the equity value of the mobile home, which is $480, but the potentially excluded value is $6,000, and 6% of that is $360. Since Bill lives in a state that uses the potentially excluded value, the mobile home meets the requirement and $6,000 of its value is exempt from his asset limit.

How Rental Properties Impact Income Limits

Income from rental properties will be counted toward Medicaid’s income limit for eligibility. This guideline is fairly straightforward. However, security deposits or rental deposits do not count, as long as the funds are earmarked to be returned to the tenant.

Rental property owners can deduct some expenses from the monthly rental income total that will be counted toward their income limit. These expenses include:

• Advertising for renters
• Interest/escrow payments on mortgages
• Property taxes
• Property insurance
• Utilities paid by owner
• Management fees
• Essential home repairs/maintenance
• Lawn care
• Snow removal

In most states in 2025, the income limit for nursing home coverage or Home and Community Based Services (HCBS) Waivers is $2,901/month. The income limit for ABD Medicaid in 2025 ranges from $967/month to $1,795/month, depending on the state.

Documents Needed for Rental Properties

As part of the Medicaid application, individuals are required to submit official documents detailing all of their financial holdings. This includes rental properties. The Medicaid agency will want documents that detail the property, ownership, fair market value, debts against the property and how much income it produces. These documents can include:

• Deed
• Property tax statement with assessment
• Mortgage
• Lien
• Lease
• Rental agreement
• Rent receipts
• Canceled checks
• Income tax return

What to Do If You Don’t Meet the Asset or Income Limit

If a rental property or its income pushes a Medicaid candidate over their asset or income limit, there are still ways they can qualify for Medicaid. These strategies tend to be complicated, and violating them can lead to a penalty period of ineligibility, so implementing them with the help of a Certified Medicaid Planner is recommended.

Those who are over the asset limit can “spend down” some of their assets by paying off debt, making home repairs or paying for their long-term care. If they want to reduce assets and need more income, they can purchase a Medicaid Compliant Annuity. If they plan far enough in advance they can establish a Medicaid Asset Protection Trust and save their rental property as an inheritance for their family.

Those are who are over their income limit have two options for gaining eligibility. Which one they use depends on their state and Medicaid program. Some will use the Medically Needy Pathway, where excess income is spent on medical bills. Others will use a Qualified Income Trust, where excess income is simply deposited into a trust and, eventually, given to the state.