When planning for the future, many Pennsylvania families want to help their loved ones financially while also preserving eligibility for Medicaid in the event long-term care is needed. A common misconception is that the federal gift tax exclusion—currently $19,000 per year per recipient in 2025—also applies to Medicaid rules. Unfortunately, this is not the case.
Federal Gift Tax Exclusion
The IRS allows individuals to give up to $19,000 per person each year without incurring federal gift tax or even having to file a gift tax return. Married couples can give $38,000 jointly. These gifts do not count against your federal estate and gift tax lifetime exemption unless you exceed the annual limit.
Medicaid Gifting Rules
Medicaid, however, operates under a completely different set of rules. In Pennsylvania, if you apply for long-term care Medicaid, the state will review all asset transfers made in the five years prior to the application. This is known as the “look-back period.”
Any transfer for less than fair market value—including gifts to family—can trigger a penalty period during which Medicaid will not pay for care, regardless of IRS rules. A $19,000 gift to a child might be perfectly fine for tax purposes, but it could delay Medicaid eligibility if made within five years of applying.
Just because a gift is tax-free doesn’t mean it’s Medicaid-safe. Always consult with a knowledgeable elder law attorney before making large gifts, especially if you or a loved one may need long-term care within the next five years.
Contact a Medicaid Planning Lawyer Today
Contact Kreisher Marshall & Associates today for an initial consultation with our legal team.