Texas Medicaid Spend Down Rules (2026)

If you are trying to qualify for Texas Medicaid long-term care by subtracting medical bills from your income the way some other states allow, stop: Texas does not work that way. For nursing-facility and waiver Medicaid, Texas is an "income-cap" state, so there is no income spend-down. In 2026, countable income at or below $2,982 a month meets the income test; if countable income is above it, the route Texas provides is a Qualified Income (Miller) Trust, not a spend-down.

In This Guide

• Key Takeaways
• Why the Texas Medicaid Spend Down Works Differently
• The Miller Trust: Texas's Income Workaround
• The Texas Medicaid Asset Spend Down Does Apply
• The Look-Back Period and Transfer Penalty
• After You Qualify: Patient Liability and the Personal Needs Allowance
• If One Spouse Needs Care: The Community Spouse
• How to Apply
• Frequently Asked Questions
• Learn More

Why the Texas Medicaid Spend Down Works Differently

A traditional Medicaid spend-down lets an applicant whose income is over the limit subtract incurred medical expenses from that income until it falls below the threshold, the way a deductible works. The federal "medically needy" pathway under 42 CFR 435.831 allows it.1 But federal law does not require a state's medically needy program to cover nursing-facility care, and the Miller Trust exception applies only in states that do not cover nursing-facility services through that pathway.5 For a fuller explanation of the national concept, see What Is a Medicaid Spend-Down?.

Texas uses an income cap instead. For nursing-facility Medicaid and Home and Community-Based Services (HCBS) waiver programs like STAR+PLUS, the 2026 special income limit is $2,982 per month for an individual and $5,964 for a couple, which equals 300% of the $994 individual SSI federal benefit rate.2

One nuance matters before you measure yourself against that number: the test is countable income, not simply everything that lands in the bank. HHSC works out whether a trust is needed by first determining what income counts, and some income does not, including certain Veterans Affairs benefits.2 But once countable income is over the limit, there is no mechanism to subtract medical bills to get below it. HHSC's rule is blunt: if countable income exceeds the institutional income limit, the person is income-ineligible for that month.6 Families who read about spend-down online and assume it applies everywhere are tripped up by this.

The Miller Trust: Texas's Income Workaround

If countable income exceeds the cap, federal law authorizes a Qualified Income Trust (QIT), commonly called a Miller Trust, under 42 U.S.C. 1396p(d)(4)(B).3 It is the income workaround for income-cap states like Texas, not a spend-down. Texas HHSC uses the same "Miller Trust" alias and frames the QIT as something that can overcome the special income limit rather than the only conceivable route, and it notes one place the QIT does not reach: it is not available to people in Community Attendant Services (CAS) who are income ineligible.2

Here is how it functions. In Texas the trust must be irrevocable and hold only the person's income; if resources are placed in it, it is not a QIT.6 A trust can take any or all of a person's income sources, but each source used must be deposited in full, in the same month it is received, and the trustee must make distributions by the last day of the following month. Income properly directed into the trust is disregarded when HHSC tests eligibility for institutional or waiver services.6 That money does not disappear: HHSC bases the resident's co-payment toward care on total income, so the trust does not reduce what the person owes. When the person dies, the trust must pay the State of Texas the funds remaining in it, up to the full amount of Medicaid assistance provided and not otherwise repaid.6 Those two terms, income only and repayment to the state at death, are federal requirements, not just Texas's.7

A Miller Trust does not shelter money or let the applicant keep extra income. It settles the income test and nothing else: HHSC says a QIT does not address the other requirements, such as citizenship, residency, medical necessity, and countable resources.2 The timing rules matter too. Income not deposited in the month it arrives counts for that month, and a trustee who fails to distribute the income by the end of the following month has made a transfer of assets.6 Because a small slip can cost a month of coverage, it is worth having an elder law attorney draft the trust.

The Texas Medicaid Asset Spend Down Does Apply

While Texas does not allow an income spend-down, the Texas Medicaid asset spend-down does apply. Texas MEPD policy sets the countable-resource limit at $2,000 for an individual and $3,000 for a couple. Which limit applies is a question of household, not of how many people are applying: the $3,000 couple limit is for married adults who live in the same household with their spouses, while the $2,000 individual limit applies to a person who is single, to a person whose spouse lives in a different household, and, under spousal-impoverishment policy, to the institutional spouse.4 So if both spouses enter a nursing facility, each is measured against $2,000, not $3,000 between them. Do not plan around the couple figure without checking which limit your household falls under.

Several resources are exempt and do not count toward that limit: the home that is the applicant's or the spouse's principal place of residence, one automobile regardless of value, and household goods and personal effects meeting the MEPD definitions.4 HHSC's eligibility summary also excludes life insurance with a face value of $1,500 or less per insured person and separately identifiable burial funds of $1,500, or more if the arrangement is irrevocable, for the applicant and spouse.2 Resources outside the exclusions count toward the limit.

Substantial home equity is a separate test, not a resource test. The homestead stays excluded as a resource. But if the applicant's equity interest in the home exceeds the 2026 substantial-home-equity limit of $752,000, Texas finds the person ineligible for Medicaid for services in an institutional setting and denies HCBS waiver services.8 What that costs depends on the setting. A person already receiving Medicaid-certified long-term care facility services, such as nursing facility care, stays eligible for all other Medicaid benefits and loses only the vendor payment while the equity stays over the limit; a person who gets HCBS waiver services is not eligible for benefits, and if the waiver program requires receipt of waiver services, that person is ineligible for all Medicaid benefits, and HHSC then checks whether they qualify for other Medicaid programs.8 Either way, a denial on this basis does not disqualify anyone from Qualified Medicare Beneficiary (QMB) or Specified Low-Income Medicare Beneficiary (SLMB) benefits.8 The policy does not apply at all if the applicant's spouse, or the applicant's child who is under 21 or is blind or permanently and totally disabled, lawfully resides in the home, and it does not prevent using a reverse mortgage or home equity loan to reduce the equity interest. The U.S. Department of Health and Human Services is also to set up a process to waive the policy for a demonstrated hardship.8

An asset spend-down means spending countable money on things you receive full value for, or moving it into an excluded form such as the one vehicle Texas excludes regardless of value or an irrevocable burial arrangement.2 Giving money away, or selling for less than it is worth, is different: that is an uncompensated transfer, and the look-back below penalizes it.3 Keep records of every expenditure.

The Look-Back Period and Transfer Penalty

Be careful with gifts and transfers. Texas applies a 60-month (5-year) look-back period to asset transfers when determining long-term-care eligibility.3 The 60 months run back from the later of entering institutional care or applying for Medicaid.2 If you gave away money or sold property for less than fair market value within that window, the Texas Health and Human Services Commission (HHSC) imposes a transfer-of-assets penalty period on long-term-care Medicaid.3

The penalty is calculated by dividing the total uncompensated transfer value by a daily penalty divisor, which is the average daily private-pay cost of nursing-facility care. For case actions disposed on or after September 1, 2025, the Texas divisor is $262.37 per day, and partial amounts are rounded down to whole days. In Texas the penalty start date is the first day of the month of the medical effective date, if the person meets all other eligibility criteria.3 Federal law exempts a transfer of the home to four people: a spouse; a child who is under 21, or is blind or permanently and totally disabled; a sibling who has an equity interest in the home and lived there for at least one year before the person entered the facility; or a son or daughter who lived there for at least two years before that and who, as determined by the state, provided care that let the parent stay at home.3 That last exemption is not automatic. It turns on a determination HHSC makes, so a family relying on it should expect to prove the caregiving to HHSC's satisfaction.3 Document any large transfer and consult an elder law attorney before making one.

After You Qualify: Patient Liability and the Personal Needs Allowance

Qualifying does not mean Medicaid pays everything while you keep all of your income. A nursing-facility resident on Medicaid keeps a personal needs allowance (PNA) of $75 per month (effective January 1, 2024) for personal expenses; the rest of the resident's income, after allowed deductions, is applied to the cost of care as patient liability.9 A Miller Trust does not lower that payment: HHSC calculates the co-payment from total income, including any income not directed to the trust, and the trust document must require the trustee to pay the resident's monthly personal needs allowance, any court-ordered guardianship fees, and an allowance for a spouse at home.6

If One Spouse Needs Care: The Community Spouse

When one spouse enters a nursing facility and the other stays home, federal spousal-impoverishment rules protect the at-home spouse, called the community spouse. Texas calls the protected amount the Spousal Protected Resource Amount (SPRA). For 2026, at the resource assessment HHSC sets it at the greater of half the couple's combined countable resources or $32,532, but no more than $162,660, and the countable resources in that formula exclude the home, household goods, personal goods, one car, and burial funds.10 These are the federal spousal-impoverishment standards Texas applies, and the $162,660 is not an absolute ceiling: a community spouse is entitled to a fair hearing on the resource allowance, and Texas can expand the SPRA on appeal, on an income-first basis tied to a $4,066.50 monthly maintenance needs allowance; a court order can also set a higher amount.10 Under that same policy, it is the institutional spouse, the one entering the facility, who is tested against the $2,000 individual resource limit, not the $3,000 couple figure.4

How to Apply

To apply for long-term-care Medicaid in Texas, contact the Texas Health and Human Services Commission (HHSC). You can dial 2-1-1 (2-1-1 Texas, or 877-541-7905 if 2-1-1 will not connect) for general health-and-human-services information and referral, or call 1-877-438-5658 to be added to a Medicaid waiver interest list; for the HCS and Texas Home Living (TxHmL) waivers, contact your Local Intellectual and Developmental Disability Authority instead.11 If your countable income is over the $2,982 monthly cap, set up the Qualified Income Trust early.2 Income is disregarded only once it is actually deposited, though where a qualifying trust is already in place the disregard can start up to three months before the application file date if all other requirements are met.6

Learn More

Find personalized help with the Texas Medicaid spend-down at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.