2327 Property Essential to Self-Support | Medicaid

Property, including property used by an individual as an employee, must be in current use in the type of activity that qualifies it as essential to be excluded as essential to self-support. Current use is evaluated on a monthly basis. Property not in current use can be excluded as essential to self-support only if the following conditions are met:

Resumption of use must be expected within 12 months of last use. For example, if property was last used in October, resumption of use must reasonably be expected to occur before the end of the following October.

The 12-month period can be extended for an additional 12 months if non-use is due to a disabling condition.

There are three categories of property essential to self-support:

Totally exclude business property as a resource, regardless of its value or rate of return.

When an individual alleges owning trade or business property not already being excluded, consider if a valid trade or business exists and whether the property is in current use. Obtain a statement giving the information below:

Obtain a copy of the business tax return (Form 1040 and the appropriate schedules) for the tax year prior to the application or redetermination. Use the return to determine the net earnings from self-employment and validity of the trade or business. The following can be particularly helpful:

If the current tax return is not available, obtain a copy of the latest tax return available.

Exclude as a resource up to $6000 of the equity value of non-business property used to produce goods or services for home consumption, regardless of the rate of return. Any portion of the equity value in excess of $6000 is a countable resource.

When an individual alleges owning property that he or she uses to produce goods or services necessary for daily activities, obtain his or her statement on the following:

If evidence to the contrary is absence, accept their statement.

Determine the CMV of real property and, if necessary, the EV of real property.

Have the individual obtain a CMV estimate of personal property from a knowledgeable source. The estimate must include the following:

When an individual alleges owning non-business real property that produces income such as land or a house for rent, obtain his or her signed statement on the following:

If evidence to the contrary is absent, accept the individual’s statement with respect to years of ownership, identity of owners and description of the property.

Effective October 1, 2006, but implemented February 1, 2007, on all applications (new or pending, including three months prior) and reviews/specials, exclude up to $6000 of the equity value of non-business income producing property as a resource only if the property produces a net annual return of at least 6% of the excluded portion. Any portion in excess of $6000 is a countable resource.

If an individual owns more than one piece of non-business income producing property, apply the following rules:

If all properties meet the 6% test but the total EV exceeds $6000, that portion of the total EV in excess of $6000 is not excluded under this provision.

Determine the rate of return based on income and value figures shown on the individual’s Schedule E (Supplemental Income Schedule) of Form 1040 for the year prior to filing of the application. If no tax return is available, obtain other appropriate evidence from the individual, such as a copy of the lease agreement for the period in question.

Also reference 2410 Rental Income if needed.

If an individual alleges owning a government license, permit, or other property that represents government authority to engage in an income producing activity, and that has value as a resource, obtain his or her signed statement as to the following:

Have the individual submit a copy of the license, permit, and/or other pertinent documents. For example, an individual engaged in fishing in Alaska would have a permit. In North Carolina, a person growing flue-cured tobacco would have a marketing sales card to sell it. If the individual cannot submit the necessary evidence, verify his or her allegations with the issuing agency. Do this by telephone if possible.

The TCA is the other most commonly encountered type of property representing government authority to engage in an income producing activity. It is issued by the U.S. Department of Agriculture’s Agricultural Stabilization and Conservation Service. It is required for the growing and selling of flue-cured tobacco, which is grown mostly in the southeastern United States. Do not confuse a TCA with a price support or subsidy, or a soil bank program.

Exclude a TCA only when the grower who has it is restricted to growing a certain quantity of the crop.

If an individual alleges owning items that are used in his or her work as an employee, obtain his or her statement on the following:

Absent evidence to the contrary, accept the individual’s statement.

All or a portion of a liquid resource used in the operation of a trade or business, such as a checking account, can be excluded from resources. This applies to all classes of assistance.