MIR Blog

MIR offers financial planning services designed to help elderly clients preserve their assets in safe investments so they may qualify for government financial assistance programs. MIR charges fees to assist elderly clients in submitting Medicaid applications, and we may receive commissions for annuities structured in the planning process. In 7 years filing Medicaid applications, we have never had an application denied.

We are not attorneys and do not offer legal advice or draft any legal documents. The decision to hire MIR is in no way equivalent to or a substitution for an attorney.

Renting a Medicaid Recipient’s Home

Since Medicaid doesn’t count a Florida homestead as a countable asset, many people decide to keep their home while on Medicaid. However, for some families, keeping the home can present some financial challenges.

Since nearly all of a Medicaid recipient’s monthly income must be paid to the nursing home, very little income ($35) is left to pay the ongoing home expenses (taxes, insurance, association dues, condo fees, lot rent, etc…). In most cases, the children or other family members step forward to pay these ongoing expenses. When there is no one to pay these expenses and the family is not interested in selling the home, it is possible to rent the home and use a portion of the rental proceeds to pay the ongoing expenses.

Below are some answers to frequent questions that arise regarding Medicaid’s treatment of rental income:

Question 1: My father resides in a nursing home but still owns his Florida home. If we rent the home, does this cause any problems with his Medicaid eligibility?
Answer: It is possible to rent his home provided there is full disclosure to Medicaid. However, Medicaid considers the net rental income received as “unearned income.” As such, this additional income may put the individual’s gross monthly income over the monthly income limit (currently $1911/mo). In many cases, the net rental income is enough to require the applicant to establish an Income Trust (so they still pass the income test).

Question 2: In renting dad’s home, how much of the rent can be used to cover the monthly expenses? What types of expenses are allowed to be paid from the rent?
Answer: Net Rental income is gross monthly rent minus “ordinary and necessary expenses paid or expected to be paid in the same taxable year.” Allowable expenses include:
maintenance lawn service interest & escrow
real estate taxes repairs advertising costs
interest on debts utilities homeowner’s insurance

Question 3: Will the gross rent or the net rent be counted towards the $1911 income limit?
Answer: Medicaid normally counts gross income, however, in the case of rental income, the “net” rental income is used to determine if the applicant exceeds the income limit.

Question 4: If we have a management company involved to assist our family in managing dad’s home as rental property, can the management company’s fees be deducted as an “allowable expense”?
Answer: Yes, the expenses of managing a rental property are allowable if the expenses are reasonable and necessary. The fee must be 10% of the rental income or less to be considered reasonable. A management fee higher than 10% can be allowed if such fees are standard for a particular geographic area (family must provide two statements from knowledgeable sources as evidence).

Note: If a home is rented and declared as rental income, verification must be submitted to DCF (copy of the lease and management company agreements, invoices for all claimed deductions, proof of taxes and insurances, etc.)