What Is Considered Income for Medicaid Long Term Care Eligibility Purposes?

Summary
To qualify for Medicaid Long Term Care, individuals must meet two financial requirements – an income limit and an asset limit. This article is focused on income. Specifically, it’s focused on what Medicaid considers income as it determines eligibility for applicants and beneficiaries. There are many types of income and “income disregards,” and rules for spousal income. We’ll also examine how the type of Medicaid Long Term Care, state of residence and marital status all impact income limits and eligibility.

Income Limits and the 3 Types of Medicaid Long Term Care

There are three types of Medicaid Long Term Care relevant to seniors – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers and Aged, Blind and Disabled (ABD) Medicaid. Nursing Home Medicaid covers all expenses associated with living in a nursing home. HCBS Waivers and ABD Medicaid cover long-term care services and supports for seniors who live in their home or the home of a family member, or, in some states, other places in the community like an assisted living facility or a memory care unit for seniors with Alzheimer’s disease or other dementias.

In most states in 2025, the individual income limit for Nursing Home Medicaid and HCBS Waivers is $2,901/month. This means that all of an individual’s countable monthly income must add up to $2,901 or less in order for them to be eligible. Understanding what Medicaid considers countable income, and what it doesn’t, is the main point of this article, but it’s complicated. So, we need to dig deeper into understanding the income limits before getting there.

There are significant exceptions to the $2,901/month limit mentioned above. In California, for example, there is no income limit for Nursing Home Medicaid, and the individual income limit for HCBS Waivers is $1,732/month. In Illinois, the income limit for both Nursing Home Medicaid and HCBS Waivers is $1,255/month. It’s also important to note that Nursing Home Medicaid beneficiaries must give almost all of their income to the state. They are only allowed to keep a personal needs allowance (ranging from $30/month to $200/month depending on the state), enough to make Medicare premium payments if they are dual eligible and enough to make spousal allowance payments, if applicable, which we will discuss below.

The income limits for ABD Medicaid applicants and beneficiaries are different. In 2025, the individual ABD income limits range from $967/month to $1,795/month, depending on the state.

These income limits are updated on an annual basis. Most states make these changes effective Jan. 1, but not all. Illinois, for example, updates its financial limits for Medicaid effective April 1 through March 31 of the following year.

Seniors must meet their income limit both when they are applying for Medicaid Long Term Care and once they have been accepted and are receiving benefits. Applicants are required to provide official documents that clearly illustrate their financial situation, including their income, along with their application. These documents might include Social Security award letters, pension statements, alimony checks, pay stubs, dividend checks, etc. The state will then re-assess a Medicaid beneficiary’s financial situation once a year during the Medicaid Renewal process. The state may be able to conduct this evaluation electronically without any input from the beneficiary, but there may be times when the beneficiary has to provide more documents during Medicaid Renewal.

Impact of Marital Status on Income Limits

The income limits discussed above are all for individual applicants and beneficiaries who are not married. But these limits can change if the applicant/beneficiary is married, and they can change again depending on if their spouse is also applying for or receiving Medicaid Long Term Care.

Many states treat each spouse in a married couple as an individual if they are both applying for (or receiving) Nursing Home Medicaid or HCBS Waivers, which means they can each have income up to the individual limit in their state. In these situations, the “name on the check” rule comes into play. This rule simply means that whichever spouse has their name on the check (be it a paycheck, Social Security check, pension payment, etc.) is the owner of the income and it will be counted toward their income limit. Some states, however, consider income from either spouse as belonging to both or “jointly owned.” In these states the married income limit for Nursing Home Medicaid or HCBS Waivers is generally double what the single income limit, so it is $5,802/month combined in many states in 2025.

The income limits change again for married couples with only one spouse applying for Medicaid Long Term Care. For Nursing Home Medicaid or HCBS Waivers applicants and beneficiaries, only the income of the spouse who is applying for or receiving Medicaid is counted. The income of the other, non-applicant spouse, often referred to as the community spouse, is not counted toward the income limit.

For married ABD Medicaid applicants, their income is always considered joint income whether both spouses are applying or just one. The married ABD Medicaid income limits in 2025 range from $1,450/month to $2,658/month, depending on the state.

Minimum Monthly Maintenance Needs Allowance

Married couples with just one spouse applying for Nursing Home Medicaid or HCBS Waivers can also use the Minimum Monthly Maintenance Needs Allowance (Minimum MMNA). This allows the applicant/beneficiary spouse to have income above their limit to give to a low-income community spouse to prevent them from living in poverty. States can set their own limit for the Minimum MMNA, but it must fall between the federal minimum standard of $2,643.75/month (effective July 1, 2025 – June 30, 2026) and the maximum standard of $3,948/month (effective Jan. 1, 2025 – Dec. 31, 2025). Some states use one limit for all community spouses, while other states have a fluctuating limit depending on the living expenses of the community spouse and the cost of living in the area. Here’s an example of how it might work:

To be clear, the Minimum MMNA can only be used by married couples with one spouse applying for or receiving Nursing Home Medicaid and HCBS Waivers. It can NOT be used by ABD Medicaid applicants or beneficiaries. The dollar amount of the Minimum MMNA can also change depending on the state and the financial situation of the community spouse.

What Medicaid Considers Income

Most income sources are counted toward Medicaid’s income limits, including wages, salary, royalties, Social Security benefits, IRA payouts, alimony, disability payments, annuity payouts, rental income and stock dividends. As mentioned above, Medicaid Long Term Care applicants must provide documents that clearly illustrate their income, such as Social Security benefits letters, pension checks and pay stubs.

Some Veterans’ Affairs (VA) Pensions are counted as income, but not all. The VA Basic Pension is counted as income in all states, but the pensions for veterans who need long-term care, Aid & Attendance (A&A) and Housebound, are exempt in some states. The A&A and Housebound Pensions are “add-ons” because, they are added to the Basic Pension for veterans who meet the functional requirements. So, a veteran who receives the A&A Pension will have to count the Basic portion of their monthly check toward their income limit, but they may not have to count the A&A portion.

Holocaust restitution payments are also exempt from the income limit in all states.

Medicaid Long Term Care applicants and beneficiaries can reduce their income totals by using Medicaid’s income disregards, which we will examine next.

Medicaid’s Income Disregards

Income disregards are also called income exclusions or income deductions. They all mean the same thing – some of a senior’s income will be disregarded (or excluded or deducted) when it comes to adding up their total countable income for the Medicaid Long Term Care income limit for eligibility.

In short, income disregards work like this: They are subtracted from a senior’s gross income, and the remaining total is their countable income. If that countable total is equal to or less than their income limit, they are income eligible for Medicaid. To be fully eligible, they would still need to meet their asset limit and any relevant medical requirements.

Two of the most common income disregards are the $20 General Income Deduction and the $65 Earned Income Deduction + Half of the Remaining Earned Income. Before detailing these disregards, we need to review the difference between unearned and earned income.

For Medicaid purposes, unearned income includes Social Security benefits, pensions, interest income, state disability payments, unemployment benefits, cash from loved ones, alimony and spousal support payments. Earned income includes wages, salary, self-employment net earnings, royalties from one’s published work and sheltered workshop payments. Both types of income are counted toward the income limit, but the difference between the two is important when it comes to income disregards.

$20 General Income Deduction

All Medicaid Long Term Care applicants and beneficiaries are entitled to this general deduction. It can also be called the $20 unearned income deduction, because if a senior has unearned income the $20 is deducted from that. If they don’t have $20 in unearned income, the $20 is deducted from their earned income.

Most states use the $20 total, but some states allow for a greater general deduction (it’s $25 in Illinois in 2024) and some states use a lesser amount. The amount can also vary depending on the type of Medicaid program and the applicant/beneficiary’s marital status. In most cases, married couples receive only one $20 General Income Deduction, even if both are Medicaid Long Term Care applicants or beneficiaries.

$65 Earned Income Deduction + Half of the Remaining Earned Income

With this income disregard, seniors can deduct $65 from their earned income and then half of their remaining earned income from their countable income total. This deduction is applied after the $20 General Income Deduction. Here’s an example of how it might work:

What to Do If You’re Over the Income Limit

Seniors who are over their income limit can still qualify for Medicaid Long Term Care. They can do this using either the Medically Needy Pathway or Qualified Income Trusts, depending on the state where they live. These strategies can be complicated, so consulting with a professional like a Certified Medicaid Planner or an Elder Law Attorney is recommended before attempting to use them on your own.

The Medically Needy Pathway allows seniors to reduce their excess income by spending it on medical expenses. Medicaid Long Term Care beneficiaries spend their own income on medical expenses until they reach their state’s Medically Needy Income Limit and then Medicaid will cover their rest of their medical expenses for a set amount of time (usually 1 month or 6 months, depending on the state). When that time is over, the process begins again, similar to an insurance deductible.

States that don’t offer the Medically Needy Pathway are known as Income Cap states. In these states, Medicaid Long Term Care beneficiaries who are over the income limit can become eligible by using a Qualified Income Trust (QIT). They simply deposit their excess income into the QIT until their income meets their income limit. After the beneficiary dies, the income in the trust goes to the state.