You have a lot to consider when you sell your house, especially if you receive government benefits, like Social Security (SS) retirement, Social Security Disability Income (SSDI), Supplemental Security Income (SSI), and Medicaid, that could be impacted by the sale of your home. But you don’t have to feel stuck in a house for fear of losing their benefits if you sell it. You have options to sell your house and protect your benefits.
While the Social Security Administration (SSA) runs all four of these government programs (SS, SSDI, SSI, and Medicaid), each has unique qualifying criteria that are impacted differently by selling your house. SSI and Medicaid benefits are most likely to be impacted because they are dependent on your income and available resources. Social Security retirement benefits and SSDI are less likely to be affected because qualifying is dependent on age and ability rather than income and resources, but you may still face other financial impacts.
Navigating unique program requirements can feel overwhelming, but we can help. You don’t have to lose your benefits if you sell your house, and this post can help you understand the impacts to your benefits as well as your options for selling your home.
Does Selling a House Affect Social Security Benefits?
Selling your home while receiving Social Security (SS) retirement income and SSDI should not impact your benefits because qualifying for these programs is not dependent on your current income or resources. However, there are tax implications you want to consider when selling your house while receiving SS and/or SSDI.
Social Security Retirement Income Typically Isn’t Impacted
Qualifying for SS is based on prior work of either you or your family member, rather than your current income or resources, so you have no asset limitations to qualify. Capital gains or money made from the sale of a home does not count toward the retirement earnings test (RET), which could otherwise reduce your benefits. This is true even if you are drawing SS benefits before you reach full retirement age.
However, selling your house while receiving SS could impact your taxable income (including your benefits income) so it’s important to understand SS income limits and reporting requirements. The greatest impact of selling your house while on SS would be on your taxable income if you have to report the proceeds for capital gains tax.
The sale of your house would not count as capital gains if all of the following three conditions are met:
Both you and your spouse (if filing jointly) lived in the home for two years.
- You lived in the house as your primary residence for at least two years within five years from the date of sale.
- You make less than $250,000, if filing single, or $500,000, if filing jointly.
Social Security Disability Benefits Typically Aren’t Impacted
Similar to SS, SSDI is dependent on the prior work of either you or your family member in addition to your disability and age so there are no asset limitations to qualify. So, similar to the SS retirement benefits, capital gains or money made from the sale of your home would not count towards the substantial gainful activity (SGA) test.
This exclusion from SGA does not absolve you from reporting capital gains from the sale of your house on your taxes, though. You must report capital gains from the sale of your house as part of your taxable income unless all the following conditions are true:
- You lived in the house as your primary residence for at least two years within five years from the date of sale.
- You make less than $250,000, if filing single, or $500,000, if filing jointly.
- Both you and your spouse (if filing jointly) lived in the home for two years.
Supplemental Security Income Benefits Can Be Impacted
Unlike SS and SSDI benefits, SSI is needs-based (also referred to as means-tested), meaning you qualify based on available resources and income, not just age or ability. Therefore, any change in your resources or income (including selling your house) could impact your SSI eligibility.
Countable resources, as defined by SSI, are anything you own that could be exchanged for cash and used for food or shelter including:
- Cash
- Bank accounts
- Stocks, mutual funds, and U.S. savings bonds
- Houses and land, excluding the home you live in and land you live on
- Life insurance
- Personal property
- Vehicles, excluding the one you or the family uses for transportation
Income is defined by SSI as anything that is cash or other assistance that you receive and can be used to meet your needs, like wages, disability benefits, unemployment, and pensions.
To qualify for and maintain SSI benefits, your countable resources and income must fall within certain asset limitations. Under these asset limitations, you cannot have more than $2,000 of assets ($3,000 if married), excluding the value of your home, one motor vehicle, personal belongings and household goods, and property you cannot use or sell. While income restrictions can vary by state, typically, your monthly income must be $2,019 or less to qualify, with few exceptions.
Some states — including Florida — also offer additional SSI benefits with unique qualifying criteria. Florida’s broader benefit qualifications are different from Federal SSI, but Florida’s Optional State Supplementation (OSS) asset limitations are the same as federal SSI standards.
Selling your home can easily put you over these asset thresholds to qualify and maintain benefits if you don’t know how to safeguard them. Simply transferring resources (even into a trust) is not always allowable and may end with a loss of benefits as well. And, if you are selling a property you inherited, it will be counted as income as soon as you have the power to sell the property. For these reasons, it’s crucial to have a plan in place to protect your benefits anytime you sell property or transfer resources.
You have a couple of options to protect your SSI benefits when you sell your house:
- Buy a new house. If you buy a new house within three months of selling your current home, you can maintain your benefits. However, you must retain less than $2,000 ($3,000 if married) from the sale of your house after purchasing your new home.
- Spend down your resources. If you lose your benefits after selling your house, you can work to spend down your assets on specific resources and apply for reinstatement if you can meet the asset limitations within 12 months from the sale of your house. Some people may spend down assets by paying in advance for funeral arrangements or paying off consumer debt and medical bills.
- Set up an Achieving Better Life Experience (ABLE) account or special needs trust if you are a person with a disability. If you meet certain criteria, money in these accounts aren’t considered a resource. You can have up to $100,000 in an ABLE account. Special needs trusts and pooled trusts also won’t impact SSI eligibility.
Medicaid Benefits Can Be Impacted
Medicaid eligibility, like SSI, is income-based, so selling your house could impact benefits if the proceeds surpass income thresholds. Because both federal and state governments fund Medicaid, eligibility requirements can vary widely. The federal government sets minimum eligibility criteria while the states determine final eligibility standards.
In Florida, asset limits also vary based on the category of eligibility you fall into. For example, if you qualify for Medicaid based on a disability but are still working within certain parameters, you have a higher income threshold than you would otherwise. Eligibility is very specific to each person’s situation, so it’s important to speak directly with someone at your state’s Medicaid agency to understand your unique eligibility requirements.
There are three primary ways you can protect your Medicaid benefits when selling your house:
- Transfer your home into a Medicaid Asset Protection Trust (MAPT). In most states, if you place your home in a MAPT at least five years before applying for Medicaid, the sale of your house won’t count against you because they are exempt from the 5-year lookback period and the proceeds go to the trust rather than you personally. This protects your Medicaid benefits eligibility by not having to count the sale proceeds as income. However, make sure you work with a knowledgeable elder law or disability attorney when setting this up as each state has different requirements for how long the trust must be established prior to the sale of a house.
- Create a special needs trust. Similar to MAPT, you can place your house in a special needs trust prior to sale, however, this type of trust is only applicable to people who have disabilities and are under the age of 65.
- Spend down proceeds. Just as you can under SSDI regulations, you can preserve your Medicaid eligibility by spending down the proceeds from the sale of a house on eligible resources within a certain timeframe to remain eligible for benefits. The asset limits vary by state and individual situation. Medicaid eligibility in Florida is determined by the Department of Children and Families (DCF) or the Social Security Administration (for SSI recipients).
Options for Selling Your Home While Receiving Benefits
If you receive Social Security retirement or Social Security Disability Income, you shouldn’t have a problem selling your home. However, if you receive SSI or Medicaid benefits, it’s best to consult with a benefits specialist or an attorney to determine the best option for your unique situation.
Some options for selling your house that you may want to consider include using a real estate agent, selling it through a cash sale, or selling it on your own.
Real Estate Agent
Selling your house through a real estate agent is a traditional route for selling. Real estate agents often bring extensive knowledge of local real estate markets that can be helpful when navigating the sale of a house. They can help you determine the best listing price, negotiate with buyers, and market your home to their network.
The primary benefit of working with a real estate agent is having someone who can handle the technical aspects of the sale — such as listing the property and managing negotiations and paperwork.
The primary disadvantage of selling your house with a real estate agent is the cost of paying realtor fees, which are — on average — 5 to 6% of the sale price. This is why many homeowners will consider selling their house without a real estate agent.
Cash Home Buyer
If you want to sell your house quickly and with minimal contingencies, cash home buyers like us may be the best option. Cash buyers purchase the house as-is so you don’t have to worry about paying for repairs before selling. This can be especially advantageous if you are on a fixed income like many people who receive government benefits. Because cash home buyers buy the house as-is, they may pay below market value, but sellers benefit by not having to pay for repairs themselves, selling quickly, and avoiding paying real estate fees.
At Florida Cash Home Buyers, we pride ourselves in helping numerous customers selling their home quickly and for a fair price. Our customer reviews and testimonials that speak to our authenticity and care for our sellers. If you’re considering working with a cash home buyer and want a quick and hassle-free sale, please reach out to us.
For Sale by Owner (FSBO)
The For Sale by Owner (FSBO) process is, as the name suggests, entirely dependent on you, from advertising and open houses to negotiations and paperwork. Although FSBO can save you on real estate agent commissions, lacking real estate and market knowledge may cost you time and money during negotiations.
An FSBO process can also be incredibly time-consuming — both in terms of managing every aspect of the sale and because of how long the property may sit on the market. Even with a good understanding of how to market your property, some marketplaces will not list your house on MLS without a real estate agent, or they may charge a fee to do so. Additionally, you won’t have the support of a real estate agent’s network, so you likely won’t see as many interested buyers. If you do choose to go the FSBO route, make sure to research real estate terms and your local market so you don’t unintentionally end up with the short end of a deal.
Do You Have to Report the Home Sale to the Social Security Administration?
After you sell your house while receiving benefits you may be wondering if you have to report the sale to the SSA. The answer depends on what type of benefits you receive.
If you receive the SS retirement benefits or SSDI, you do not need to report anything to the SSA. You only need to report capital gains from the sale (if any) on your income taxes.
If you receive SSI or Medicaid, you will need to report the sale of your house to the SSA since both of these benefits are dependent on income and resources. The SSA requires people who receive these benefits to report any changes in their living situation, resources, and earn or unearned income (among other things) — all of which may change with the sale of a house.
If you don’t report these changes you risk receiving an overpayment of benefits. Then you will be responsible for paying back those amounts once the SSA becomes aware of the changes. You may also be charged a penalty or have payments sanctioned (suspended) for 6 to 12 months if this happens.
Work with a Team You Can Trust to Protect Your Interests
If you’re receiving benefits and want to sell your home, the considerations above should help you navigate what the best next steps are for your situation. If you need someone you can trust to protect your interests while also providing a quick, all-cash sale, we’d love to help. Contact us to get an offer today!