If you’ve worked hard all your life and are thinking about retirement, you may wonder how you can generate extra income once you’re on a fixed budget. Maybe you want to travel or could use some additional money for your retirement dreams. If you own a home, you may consider renting out your property to provide some supplemental earnings and keep your house in the future. However, it’s important to weigh this decision against the possibility of needing long-term care should you become incapacitated or suffer a debilitating illness. If you plan to apply for Medicaid benefits to pay for your long-term care needs, rental income could disqualify you from Medicaid eligibility.
At Landskind & Ricaforte Law Group, P.C., our experienced elder law and Medicaid planning attorneys understand why you might want to rent your home to earn extra cash. But we’ve seen how clients can be blindsided when they learn their rental income prohibits them from obtaining Medicaid benefits. Here, we discuss how Medicaid treats rental property and what you can do to help protect your eligibility for Medicaid.
How Renting Your House Affects Your Eligibility for Medicaid
If you rent your house as a way to make extra money, it’s important to know that Medicaid has strict income and asset limits for applicants. As of 2025, a single person in New York can have no more than $32,396 in assets (savings, investments, etc.) to qualify. Your primary residence is generally an exempt asset—meaning it doesn't count towards that limit. But the moment you start renting it out, things can get complicated.
Medicaid considers rental income as part of your overall income. And in New York, if your income exceeds $1,800 per month (for an individual), you won't qualify for Medicaid coverage. So, even if your rental doesn't push you over the asset limit, the monthly rent checks could still make you ineligible based on income restrictions.
Renting Out Part of Your House
Some homeowners try to get around the rules by renting out a room or floor while still living in the property. However, Medicaid won’t accept this workaround. Even if you occupy part of the house, any rental income you receive counts toward your total income for Medicaid eligibility.
The only way to exclude rental income is if you're renting to an immediate family member, such as an adult child, who's acting as an informal caregiver. In those cases, Medicaid may not count the rental payments as income. But you need to be careful. If your relative isn't providing a significant level of care, Medicaid could still consider it a standard rental situation.
You may be able to deduct certain expenses related to the property, such as property taxes, mortgage interest, maintenance costs, and repairs. This could potentially reduce the amount of income Medicaid counts when determining eligibility. However, security deposits and/or rental deposits are not counted as income as long as you intend to return them to the tenant when the rental agreement has ended. If you use any portion of a security deposit, Medicaid counts it as income.
Not Reporting Your Rental Income
Some people who rent their homes may be tempted to hide their rental income from Medicaid. But this is never a good idea. When you apply for Medicaid benefits, you're required to disclose all sources of income—including any rent payments you receive. If you fail to report rental income, you’re committing Medicaid fraud, and that can lead to denied coverage, clawback actions, and even criminal penalties.
What Is a Clawback Action?
Clawback actions allow people to recover or “claw back” funds that were taken from them under fraudulent pretenses by the orchestrator of the scheme.
Medicaid payback, or what some people refer to as Medicaid estate recovery or Medicaid clawback, is the process by which state Medicaid programs seek reimbursement for long-term care costs paid on behalf of a Medicaid recipient after their death.
Additionally, Medicaid routinely cross-references applicant information with tax records and other government databases. If you report rental income on your taxes but "forget" to mention it to Medicaid, you can expect that Medicaid will notice the discrepancy. Getting caught in a lie will likely sabotage your eligibility.
Renting Your Home Without Losing Medicaid Benefits
If you want to become a landlord and rent your property, there are some ways you may be able to minimize the impact on your Medicaid eligibility, including the following:
- You can set the rent at or below market rates. By charging less, you can keep your overall income low enough to stay within Medicaid limits. Of course, this means sacrificing potential profits, which may defeat the purpose of renting the property.
- You can put your home inside a trust and have the trust collect the rental income. If structured properly, the trust income may not count against your personal Medicaid eligibility. However, Medicaid rules around trusts are extremely complex. If you make a mistake, you could face a lengthy penalty period that delays your benefits.
Talk to Our New York Elder Law Attorneys
When you make the decision to rent your home while on Medicaid, there are many things to consider. You want to generate income, but you also want to preserve your Medicaid eligibility. Before you rent your home or sign any leases, it’s important to speak with our experienced New York elder law attorney who understands the complexities of Medicaid planning.
Together, we can assess your unique situation, explore alternative strategies, and develop a personalized plan to protect your assets—and your healthcare coverage. We understand your desire to make additional cash to support your retirement, but renting your home to achieve that goal may jeopardize the long-term care you might need in the future. Read our testimonials to learn how we’ve helped other clients who considered renting their home after retirement.