Texas Medicaid caps countable assets at $2,000, but the family home is usually exempt and there are legal ways to spend down the rest. Here's how Houston families get it right.
Quick answer: Texas Medicaid for long-term care limits a single applicant to $2,000 in countable assets, but a long list of things don’t count against that limit — most importantly the family home, up to a substantial equity cap, as long as a spouse lives there or the applicant intends to return. “Spend-down” means legally converting excess countable assets into exempt ones — paying down debt, fixing up the house, prepaying a funeral — before applying. Do it the wrong way, by simply gifting money or property to family within 60 months of applying, and HHSC can impose a penalty period that leaves no one paying the bill.
A homestead exemption, or the Medicaid homestead rule? They’re not the same thing
Search “Texas homestead exemption” and most of what comes up is about property taxes — the discount a homeowner gets on their county appraisal. That is a real thing, and it has nothing to do with Medicaid. This guide is about a different question entirely: whether a Houston family’s house counts against the asset limit when a parent applies for Texas Medicaid to pay for a nursing facility or an assisted living waiver. The Texas Health and Human Services Commission (HHSC) calls this the home’s treatment as a countable resource, and the rules live in the Medicaid for the Elderly and People with Disabilities (MEPD) handbook, not the county tax code. Families who confuse the two sometimes assume the house is automatically protected because they filed a tax exemption. It isn’t the same filing, and it isn’t the same protection.
The $2,000 asset limit: what actually counts
A single Medicaid long-term care applicant in Texas can have no more than $2,000 in countable resources on the date HHSC decides the case. That number has stayed the same for years and applies whether the benefit is a nursing facility placement or an HCBS waiver such as STAR+PLUS. What trips families up isn’t the number — it’s that most of what a retired couple owns doesn’t count toward it. Countable resources generally include checking and savings accounts, CDs, stocks and bonds, and any second property. Exempt resources — things HHSC doesn’t count — generally include the primary home (within limits explained below), one vehicle of any value, household goods and personal effects, prepaid burial arrangements structured correctly, and certain retirement accounts depending on payout status. The practical work of “spend-down” is sorting a parent’s finances into those two buckets and legally moving money from the countable side to the exempt side before the application goes in, or using it to pay down debt and cover legitimate expenses so it simply isn’t there to count.
The house: Texas’s substantial home equity limit
A primary residence is excluded from the countable asset limit as long as the applicant, their spouse, or a minor, blind, or disabled child lives there — or the applicant states an intent to return, even if they never actually do. That exclusion isn’t unlimited, though. HHSC applies what it calls a substantial home equity limit: if the applicant’s equity interest in the home exceeds that threshold, the home stops being exempt for institutional or waiver Medicaid purposes. As of the current HHSC handbook, that limit is $713,000, and it adjusts periodically with the cost of living. Very few Houston-area homes come close to that figure, which is exactly why this rule surprises so few families — but it matters more in fast-appreciating parts of Harris, Fort Bend, and Montgomery counties than it used to. If your parent’s home equity is anywhere near that range, confirm the current limit with an HHSC caseworker or an elder law attorney before assuming the house is automatically safe.
Married couples: protecting the spouse who stays home
When one spouse needs nursing facility or waiver-level care and the other stays in the community, federal spousal impoverishment rules let the at-home spouse keep a separate pool of resources called the Community Spouse Resource Allowance, on top of the applicant’s $2,000. The allowance has a floor and a ceiling set federally and recalculated each year, and Texas applies whichever amount the couple’s countable resources support within that range. There’s a parallel income protection, the Minimum Monthly Maintenance Needs Allowance, that can let some of the applying spouse’s income flow to the at-home spouse if the community spouse’s own income falls short. Because both figures move annually and depend on the couple’s specific numbers, this is one part of the process where a phone call to HHSC or a benefits counselor before applying is worth far more than a number printed in an article.
The 60-month look-back: why timing is everything
HHSC doesn’t just look at what a parent owns on the day they apply. Under federal law, Texas reviews the 60 months (five years) before the application date for any asset transferred for less than fair market value — a car deeded to a grandchild, cash gifted to help a child with a down payment, a house signed over for $1. If HHSC finds one, it doesn’t just deny the transferred amount; it calculates a penalty period, a stretch of months where Medicaid won’t pay for care at all, even though the applicant now qualifies financially. The penalty period length is based on the value transferred divided by the average private-pay cost of care in Texas, and it starts running from the date of application, not the date of the gift — which means a poorly timed gift made years ago can still block coverage the month a family needs it most. There are exceptions, including transfers to a spouse, to a blind or disabled child, or in some cases to a caregiver child who lived in the home and provided care that delayed a nursing facility admission. Those exceptions have specific documentation requirements and are not automatic.
Legal ways to spend down before applying
None of this means a family with savings above $2,000 is stuck. It means the spending has to convert countable assets into exempt ones or pay for real, current expenses — not move money out of the household. Common, legitimate approaches include:
- Paying off debt — the mortgage, a car loan, credit cards, medical bills already owed.
- Home repairs and safety modifications — a roof, HVAC replacement, grab bars, a wheelchair ramp, widened doorways.
- Prepaying funeral and burial costs through an irrevocable, HHSC-compliant prepaid funeral contract or burial trust for the applicant and, in some cases, immediate family.
- Replacing an aging vehicle, since one vehicle is exempt regardless of value.
- Paying for care, equipment, or medical costs not covered by insurance that the parent needs now, such as hearing aids, dental work, or a period of private-pay care while the application is pending.
Every one of these should be documented with receipts and dated close to the spend-down, because HHSC can and does ask for records during the application’s resource review.
What sets off a penalty period
The mistakes that cause real problems are almost always informal transfers made without understanding the look-back: adding an adult child’s name to a bank account or the deed “to make things easier,” gifting money to grandchildren using the federal gift-tax exclusion (a tax-law figure that has nothing to do with Medicaid’s rules and does not protect the gift from a penalty period), or selling a home to a family member below market value. None of these are illegal, and none of them are unusual things for a family to do — they just weren’t done with Medicaid’s five-year window in mind. If your parent has made any transfer like this in the last five years, tell whoever is helping with the application before HHSC finds it during the resource review, not after.
After death: the Medicaid Estate Recovery Program and the house
Texas can seek repayment from the estate of a Medicaid recipient who received long-term care services after age 55, through the Medicaid Estate Recovery Program (MERP) — and the home, even though it was exempt during the applicant’s lifetime, is usually the largest asset in that estate. HHSC will not pursue recovery, though, if a surviving spouse is alive, if a surviving child is under 21 or is blind or disabled at any age, if the estate is worth $10,000 or less, if the amount Medicaid paid was $3,000 or less, or if an unmarried adult child lived in the home continuously for at least a year before the parent’s death. There is also an undue-hardship waiver for homesteads under a set value where the heirs’ household income falls under a federal poverty percentage threshold that HHSC publishes and updates. Because these dollar thresholds and the hardship application process change, and because we’ve seen unverified numbers circulating for this program online, don’t rely on any single figure you read — confirm the current thresholds directly with HHSC’s estate recovery contractor or an elder law attorney before assuming the house is or isn’t protected after death.
Where Houston families can get real help with this
None of this is something a family should have to figure out from scratch while also managing a parent’s care. HHSC caseworkers can confirm current limits for your specific case. The Area Agency on Aging serving Harris, Fort Bend, Montgomery, Brazoria, Galveston, Liberty, Waller, and Chambers counties offers free benefits counseling. And a Texas-licensed elder law attorney is worth the consultation fee for anything involving a home, a recent transfer, or a blended family — a mistake in this area is expensive and hard to undo once an application is filed.
Last updated September 22, 2026. This guide is general information for Greater Houston families, not medical, legal, or financial advice.
