Medicaid can treat a home worth as much as $752,000 in equity as an exempt asset in 2026, letting an applicant qualify for long-term-care coverage without being forced to sell the property while still living in it. That $752,000 figure is the federal minimum every state must honor, and some states set the ceiling far higher, up to $1,130,000. The rule is one of the most consequential in Medicaid planning because it decides whether the largest asset most retirees own counts against a program with an otherwise strict limit of roughly $2,000 in other resources.
How the $752,000 home-equity limit works
For most assets, Medicaid’s long-term-care programs impose a sharp resource ceiling, often around $2,000 for an individual. A primary residence is treated differently: its equity is disregarded as long as the owner lives there and the equity stays under the applicable limit. In 2026 that limit runs from a federal minimum of $752,000 to a maximum of $1,130,000, according to the current 2026 Medicaid long-term-care eligibility figures, with each state choosing where within that band its own cap sits.
The exemption depends on the equity interest, not the market value of the home. Equity is the property’s value minus any mortgage or other debt against it, so a house that sells for far more than the limit can still qualify if enough is owed on it. A home whose equity exceeds the state’s limit is not exempt, and that excess can block eligibility for coverage of nursing home care and other long-term services until the equity is reduced.
Reducing that equity is rarely as simple as signing the house over to a relative. Under the same 2005 law, state Medicaid programs apply a 60-month look-back to asset transfers, reviewing five years of gifts and below-market sales before approving an application; a home handed to a family member inside that window can trigger a penalty period during which Medicaid will not pay for long-term care, calculated from the value that was given away. Because the penalty scales with the amount transferred, giving away a high-value home can delay coverage for years. An owner whose equity sits above the state’s limit generally must spend the excess down, borrow against the home through a loan or reverse mortgage to lower the equity interest, or wait out the look-back rather than gift the property outright.
Certain circumstances lift the equity limit entirely. When a spouse, a child under 21, or a blind or disabled child of the applicant lives in the home, the equity cap does not apply, according to guidance such as the Texas Medicaid handbook’s rule on substantial home equity. That carve-out protects families in which a dependent relative would otherwise lose the residence when an applicant enters long-term care.
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Why the limit rises each year but only to a point
The home-equity rule was created by the Deficit Reduction Act of 2005, which for the first time capped how much home equity could be sheltered when applying for Medicaid long-term care. The federal backgrounder on that law set the original range at a $500,000 minimum and a $750,000 maximum, with states free to choose a figure between the two.
Those thresholds have been adjusted for inflation each year since 2011, which is how the minimum climbed from $500,000 to $752,000 over roughly a decade and a half. The annual indexing means the exempt amount grows gradually rather than in sudden jumps, tracking the consumer price level. Because states can adopt any figure between the federal floor and ceiling, the equity that Medicaid actually shelters depends heavily on where an applicant lives.
That variation makes the $752,000 figure a guaranteed floor rather than a national standard. An applicant in a state that uses the minimum has a lower shelter than one in a state that adopts the $1,130,000 maximum, even though both face the same federal program. The difference can determine whether a home just over the lower threshold counts as a disqualifying asset in one state and an exempt one in another.
The $1 million cap arriving in 2028
The exemption is about to change. A provision in the 2025 budget law will bar state Medicaid programs from covering long-term services and supports for anyone whose home equity exceeds $1 million beginning in January 2028, according to an analysis by the advocacy group Justice in Aging. Unlike the current indexed range, that ceiling is a hard cap, and it will not apply to homes located on agricultural property.
The 2028 change narrows the top of the range that states can offer, since a $1,130,000 maximum will no longer be permissible once the $1 million limit takes hold. For higher-value homes, that shift could pull the equity shelter below where several states set it today, tightening eligibility for owners of the most valuable properties.
None of this touches what happens after death, which is governed by a separate process. While the owner is alive and residing in the home, the equity exemption keeps the property out of the resource calculation; after death, Medicaid estate recovery can still seek repayment from the home’s value. The $752,000 figure describes the living-owner shelter for 2026, a number that will edge higher next year with indexing and then run into the new statutory ceiling in 2028.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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