Medicaid 5-Year Look-Back Period: Rules, Penalties and Every State's 2026 Divisor

When your parent applies for Medicaid to pay for a nursing home, the state looks back at every asset they gave away or sold for less than it was worth in the 60 months before the application date. Federal law set the five-year window in the Deficit Reduction Act of 2005, and nearly every state uses it for nursing-home Medicaid. California and New Hampshire use shorter windows, described below the state table.

The look-back is not a ban on gifts. It is a timer. A gift made inside the window does not disqualify your parent forever; it creates a penalty period: a number of months during which Medicaid will not pay for nursing-home care, even though your parent otherwise qualifies. A gift made more than five years before the application is not reviewed at all. In many states, including Ohio, Texas and Oklahoma, the same rules apply to Medicaid home-care and assisted-living waivers, not only nursing homes.

One common misunderstanding: the IRS annual gift tax exclusion has nothing to do with Medicaid. A gift small enough to need no gift tax return can still create a Medicaid penalty.

The rule matters most for the families who least expect it: a parent who gave each grandchild money for college, paid a child's mortgage for a few months, or added a son to the deed of the house. None of that was meant to dodge Medicaid, but the state counts it the same way. That is why the application asks for five years of bank statements (see our guide to the Medicaid application paperwork).

Each state publishes a penalty divisor: its average monthly cost of private-pay nursing-home care. The penalty is the total value of the gifts in the look-back window divided by that figure. The answer is the number of months Medicaid will not pay.

Take a mother in Ohio who gave her son $50,000 toward a house two years before entering a nursing home. Ohio's divisor is $8,669 a month (from September 2026). $50,000 ÷ $8,669 = 5.77, so her penalty is about five months and 23 days. Federal rules require states to count the partial month, so the 0.77 isn't dropped.

The part that catches families out is when the penalty starts. It does not start on the date of the gift. It starts only once your parent is in the nursing home, has applied, and would otherwise qualify, meaning their own savings are already down to the asset limit. So for those five-plus months, the family has to find another way to pay the nursing-home bill, at exactly the point when your parent's money is gone. The divisor is the state's own figure, updated periodically, and it usually trails real prices: the median private-pay rate for a semi-private room in Ohio is about $9,300 a month, so the penalty in this example costs roughly $53,000, more than the original gift. Medicaid still covers your parent's doctor visits, hospital stays and prescriptions during the penalty; only the long-term care is held back.

A few states soften the rule for small gifts. Texas does not penalize transfers totaling $200 or less in a month, Pennsylvania ignores $500 or less in a month, and Indiana deducts a $1,200-a-year allowance for gifts to family or charity. Most states have no such allowance: even modest birthday checks add up across five years.

Divisors vary by more than two to one, so the same gift costs very different amounts of time depending on where your parent applies. A $50,000 gift means about 3 months of penalty in Connecticut or New York and nearly 7 in Utah or Louisiana. Most states update the figure once a year, and most use the divisor in effect on the application date, not the date of the gift. Several states work the penalty out in days using a daily rate; the table shows the daily figure for those.

California is the main exception to the five-year window. When it brought back an asset test on January 1, 2026, it set a 30-month look-back that counts only gifts made from January 2026 onward, so gifts from 2024 and 2025 are not reviewed. California also drops partial months and caps any penalty at 30 months. New Hampshire moved to a tiered look-back in 2024 under a 2023 state law: most applicants are reviewed for 36 months, and the full 60 months applies when there are trusts, annuities, retirement accounts, investments or transferred real estate. NH DHHS decides which tier applies when the application is reviewed.

Anything your parent gave away, or sold or swapped for less than fair market value, during the window. The common ones:

• Cash gifts to children, grandchildren or anyone else, including help with a down payment, tuition or bills.
• Selling something below its value, such as a car or the house sold to a relative at a discount. The penalty is based on the difference.
• Adding a child to the deed of the house. Giving away a share of the home is a transfer as soon as the new deed is recorded.
• Joint bank accounts. Adding a child's name to an account is not usually a gift by itself, but money the child takes out for their own use is.
• Paying family for care without a written agreement. Money paid to a daughter for looking after her mother is often treated as a gift unless there was a written care agreement at the time and the pay was reasonable for the work.
• Forgiving a loan or giving up an inheritance your parent was entitled to.
• Moving money into most trusts or certain annuities that don't meet Medicaid's rules.

Ordinary spending is not a transfer. Paying your parent's own bills, buying them a car or clothes, repairing their home, prepaying their funeral, or paying off their debts all reduce savings without creating a penalty.

Federal law (42 U.S.C. §1396p(c)(2)) lists transfers that never trigger a penalty, in every state:

• Anything to a spouse, or to someone else for the spouse's sole benefit. This avoids a penalty but doesn't shield the money: Medicaid counts both spouses' savings together, and the spouse at home keeps only the state's spousal allowance (up to $162,660 in 2026).
• Anything to a child who is blind or permanently disabled, or to a trust set up solely for that child's benefit (or solely for any disabled person under 65).
• The home, if it goes to: a spouse; a child under 21; a blind or disabled child; a brother or sister who already owns part of the home and lived there for at least a year before your parent entered the nursing home; or a "caregiver child" who lived in the home for at least two years immediately before and provided care that kept your parent out of a nursing home.
• Transfers made for a reason other than qualifying for Medicaid, if your parent can show it, for example a gift made while healthy with no expectation of needing care. This is hard to prove and is decided case by case.

The caregiver-child exemption is the one families most often miss. It needs evidence: proof the child lived there (mail, a driver's license, tax returns) and usually a doctor's statement that the care delayed nursing-home placement.

Returning the gift removes the penalty. Under federal rules, if all of the money or property comes back to your parent, it is treated as if it was never transferred; many states also shorten the penalty when part of it is returned; in states that don't, only a full return removes it. The returned money then counts as your parent's savings and has to be spent down like any other.

A hardship waiver is available in every state when the penalty would leave your parent without food, shelter or medical care, for instance when the person who received the gift cannot or will not give it back and the nursing home is threatening discharge. Waivers are granted case by case and the bar is high.

Timing the application matters. Because the penalty only starts once your parent otherwise qualifies, applying before their savings are down to the limit delays the clock rather than starting it. If a gift is close to five years old, waiting until it falls outside the window may avoid the penalty entirely. When there is a house, a spouse at home or a large gift involved, this is where an elder law attorney earns their fee.