Co-authored by Joanna C. Feldman
This is a question we’re continually asked, so we’re glad we have another opportunity to clear things up. The main thing to remember is this: IRS rules are different from Medicaid rules.
Under current IRS rules, you may gift up to $15,000.00 to as many people as you’d like in 2018 (increased from $14,000.00 in 2017) without needing to file a gift tax return. This is known as the gift tax exclusion, and you can think of gifts that qualify as being excluded from needing to be reported to the IRS. If your gift to someone (other than your spouse) is over $15,000.00, you must tell the IRS.
The annual gift tax exclusion, however, does not tie into Medicaid. Under rules concerning Medicaid eligibility for nursing home services, any gifts within the preceding five (5) year period (often referred to as the “look back period”) will be evaluated and may result in a penalty period during which Medicaid will not pay. (It is important to note that currently, there is no look back period for community Medicaid when one stays at home.)
Again – and I can’t stress this enough – do not try to reduce your assets for Medicaid eligibility purposes by making gifts that you do not need to report to the IRS. You will need to report them to the government for Medicaid purposes, and they can have a detrimental effect on eligibility.