State of Wisconsin Department of Health Services

Release 24-02 August 22, 2024

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16.9 Property Essential to Self-Support

16.9.1 Introduction to Property Essential to Self-Support

Certain assets deemed to be essential to an individual's means of self-support are excluded. These assets fall into three main categories:

• Property used in an established trade or business, which is excluded regardless of its value or rate of return if the business is currently operating for the self-support of the individual or their spouse, or there is a reasonable expectation it will resume operating within the next 12 months (see SECTION 15.6.3.1 BUSINESS ASSETS)
• Nonbusiness property used to produce goods or services essential to self-support, which is excluded up to $6,000
• Nonbusiness income-producing property, which is excluded up to $6,000 if it produces at least a six percent rate of return

16.9.2 Business Property Excluded Regardless of Value Rate of Return

This category includes:

• Property used in a trade or business, if the individual is actively involved in the business operation on a day-to-day basis
• Government-issued permits (such as commercial fishing permits)
• Personal property used by an individual as an employee for work or required by an employer for work

Note:

Rental property is not considered business property unless the property owner is in the business of renting and managing properties. If a person simply owns a piece of property and is renting it to produce passive income, they are not considered to be the owner of a trade or business.

The information reported on the Schedule E, Supplemental Income and Loss (if applicable), should be checked to determine whether the individual is actively engaged in the business. If the income is listed as Non-Passive Income, the individual is actively engaged in the business.

When determining if a trade or business exists in an LLC or other questionable situations, the agency should consider:

• Does the IRS regard this as a trade or business?
• Does the individual have documents to support the claim of trade or business such as licenses, permits, registration, etc.?
• Is the individual a member of a business or trade association?

16.9.3 Nonbusiness Property Excluded up to $6,000 Regardless of Rate of Return

This category includes non-business property used to produce goods or services essential to self-support. Any portion of the property's equity value in excess of $6,000 is not excluded.

Nonbusiness property essential to self-support can be real or personal property. It produces goods or services essential to self-support when it is used, for example, to grow produce or livestock solely for personal consumption, or to perform activities essential to the production of food solely for home consumption.

Example 1

John owns two acres of land that he uses to grow fruits and vegetables for his personal consumption. Up to $6,000 of the equity value of the property is exempt.

16.9.4 Nonbusiness Income-Producing Property Excluded up to $6,000 if it Produces at Least Six Percent Rate of Return

Nonbusiness income-producing property is real property or other non-liquid property that provides rental or other income but is not used as a part of a trade or business. Nonbusiness income producing property includes, but is not limited to, the following:

• Structures producing rental income
• Land producing rent or other land use fees (non-liquid notes or mortgages, royalties for timber rights, mineral exploration, etc.)

Example 2

James is applying for EBD Medicaid. He lives in a CBRF and is renting out his home which has an equity value of $20,000. He does not intend to return to the home. The income from the rent exceeds 6 percent of the equity value of the home, so $6,000 of the equity value is exempt. The remaining $14,000 is a counted asset.

 

Example 3

Joan is applying for EBD Medicaid. She lives in her home but also owns a lake cottage in northern Wisconsin. She rents the cottage during the summer months. The income from the rent does not equal 6 percent of the equity value of the cottage. The entire equity value of the cottage is a countable asset.

If the excluded portion produces less than a six percent return due to circumstances beyond the person's control (e.g., crop failure, illness), and there is reasonable expectation that it will again produce at least a six percent return, continue to consider the first $6,000 in equity as excluded.

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The information concerning the Medicaid program provided in this handbook release is published in accordance with: Titles XI and XIX of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapters 46 and 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2, 10 and 101 through 109 of the Wisconsin Administrative Code.

Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.

Publication Number: P-10030