A Roth IRA conversion can directly affect your Medicaid eligibility because the converted amount counts as taxable income in the year you convert. For MAGI-based Medicaid (used in expansion states for adults under 65), this added income could push you over the eligibility threshold of 138% of the Federal Poverty Level. For long-term care Medicaid, the rules are different: Roth IRAs are often counted as available assets because they have no Required Minimum Distributions (RMDs), making them fully accessible in the eyes of most state Medicaid programs.
Does a Roth Conversion Count as Income for Medicaid?
Yes. When you convert funds from a traditional IRA or 401(k) to a Roth IRA, you must report the converted amount as taxable income on your federal tax return. This increases your Modified Adjusted Gross Income (MAGI), which is the income measure used for Medicaid eligibility for most adults under 65 in states that expanded Medicaid under the Affordable Care Act.
For example, if your regular income is $15,000 per year and you convert $10,000 from a traditional IRA to a Roth IRA, your MAGI for that year becomes $25,000. For a single adult in 2026, the MAGI Medicaid income limit is approximately 138% of the Federal Poverty Level, which works out to roughly $22,024 per year. That $10,000 conversion would push you over the limit and make you ineligible for MAGI Medicaid in that calendar year.
MAGI Medicaid Income Limits for 2026
The following table shows approximate annual income limits for MAGI-based Medicaid in expansion states. These figures are based on 138% of the 2026 Federal Poverty Level (FPL of $15,960 for a single individual). Actual limits vary slightly by state due to rounding and the built-in 5% income disregard.
| Household Size | 138% FPL (Approximate Annual Limit) | Monthly Equivalent |
|---|---|---|
| 1 | $22,024 | $1,835 |
| 2 | $29,826 | $2,486 |
| 3 | $37,628 | $3,136 |
| 4 | $45,430 | $3,786 |
| 5 | $53,232 | $4,436 |
| 6 | $61,034 | $5,086 |
Important: These limits apply to MAGI Medicaid in the 40 states (plus DC) that have expanded Medicaid. In the 10 states that have not expanded Medicaid, adults without children may not qualify for Medicaid at any income level, and parent/caretaker income limits are often much lower.
Not sure if you qualify? Check your eligibility for Medicaid and other programs in under 2 minutes.
How Does a Roth IRA Affect Long-Term Care Medicaid?
Long-term care Medicaid (nursing home Medicaid and Home and Community Based Services waivers) uses different rules than MAGI Medicaid. For applicants who are 65 and older or who need institutional care, most states apply both an income test and an asset test.
Asset Test
In most states, the asset limit for a single Medicaid applicant seeking long-term care is approximately $2,000. Some states set higher limits. Roth IRAs are typically counted as available assets for Medicaid purposes because, unlike traditional IRAs, Roth accounts do not require minimum distributions. Since the account holder can access the full balance at any time, Medicaid views the Roth IRA as a countable resource.
A traditional IRA that is in "payout status" (meaning the owner is taking regular distributions, at minimum the RMD) may be excluded from the asset test in many states. However, the distributions count as income.
Income Test
For long-term care Medicaid, most states set the income limit at approximately $2,982 per month in 2026 for a single applicant. Any distributions from retirement accounts, including Roth IRA withdrawals, count toward this income limit along with Social Security and pension income.
| Medicaid Type | Income Test | Asset Test | Roth IRA Treatment |
|---|---|---|---|
| MAGI Medicaid (under 65) | 138% FPL (~$22,024/year for individual) | No asset test | Conversion income counts toward MAGI |
| Long-Term Care Medicaid (65+) | ~$2,982/month (varies by state) | ~$2,000 (varies by state) | Counted as available asset; withdrawals count as income |
What Is the Medicaid Lookback Period and How Does It Affect Roth Conversions?
When you apply for long-term care Medicaid, most states review your financial transactions from the prior 60 months (five years). This is called the lookback period. The purpose is to identify any assets that were transferred, gifted, or spent below fair market value in an attempt to qualify for Medicaid.
A Roth conversion itself is generally not a gift or transfer for less than fair market value because you are moving money from one account you own to another account you own. However, there are related scenarios to watch for:
- Withdrawals from a Roth IRA that are then gifted to family members could trigger a transfer penalty during the lookback period
- Converting and then spending down the Roth IRA balance could raise questions if done shortly before applying for Medicaid
- Each Roth conversion starts its own five-year clock for penalty-free withdrawal of converted funds (this is a tax rule, separate from Medicaid's lookback)
If Medicaid determines that you transferred assets to become eligible, they may impose a penalty period during which you are ineligible for benefits. The length of this penalty depends on the amount transferred and your state's rules.
Roth Conversion vs. Keeping a Traditional IRA: Comparison for Medicaid Planning
| Factor | Traditional IRA | Roth IRA |
|---|---|---|
| Required Minimum Distributions | Yes, starting at age 73 | No RMDs during owner's lifetime |
| Asset test (long-term care Medicaid) | May be excluded if in payout status (state-dependent) | Typically counted as available asset |
| Income impact (MAGI Medicaid) | Distributions increase MAGI | Qualified withdrawals may not increase MAGI, but conversion itself does |
| Income impact (long-term care) | Distributions count as income | Withdrawals count as income |
| Tax treatment at conversion | N/A | Full converted amount is taxable income that year |
| Lookback period risk | Low if taking regular distributions | Low for conversion itself; high if funds are then gifted |
Step-by-Step: How to Evaluate a Roth Conversion When Medicaid Is a Concern
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Determine which type of Medicaid applies to you. If you are under 65 and seeking health coverage, MAGI Medicaid rules apply. If you are 65 or older or need long-term care, asset-based rules apply. Use our free screener to check your eligibility.
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Calculate your current MAGI. Add up all sources of income that count toward MAGI: wages, Social Security (taxable portion), pension income, investment income, and any other adjusted gross income items.
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Estimate the impact of the conversion. Add the proposed conversion amount to your current MAGI. Compare the total to your state's Medicaid income limit.
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Consider the asset implications. If long-term care Medicaid is a possibility in the near future, remember that Roth IRA funds are typically counted as assets. A conversion from a traditional IRA in payout status to a Roth IRA could actually hurt your eligibility by converting an excluded asset into a countable one.
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Review the timing. If you plan to apply for Medicaid within five years, carefully evaluate whether any conversion or subsequent withdrawal could trigger lookback issues.
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Consult a Medicaid planning professional. Rules vary significantly by state. An elder law attorney or Medicaid planner can help you understand your specific state's treatment of retirement accounts.
When a Roth Conversion Might Make Sense Despite Medicaid Concerns
There are situations where converting to a Roth IRA can be beneficial even if Medicaid is part of your planning:
- You are years away from needing Medicaid. If long-term care is not anticipated for at least five to ten years, converting now and paying the taxes could reduce future income from RMDs, potentially helping with Medicaid eligibility later.
- You are in a low tax bracket. Converting during a year with low income (but still below Medicaid limits or when you do not need Medicaid) locks in a lower tax rate on those funds.
- You want to eliminate future RMDs. Roth IRAs have no RMDs, which means less mandatory income in retirement. This can help keep income below Medicaid thresholds in future years.
- Your state does not count Roth IRAs as assets. A small number of states have more favorable rules for Roth IRAs. Check your state's specific Medicaid manual.
When a Roth Conversion Could Hurt Medicaid Eligibility
- You are currently on MAGI Medicaid. The conversion income could push you over the limit, causing you to lose coverage for the year.
- You plan to apply for long-term care Medicaid soon. Converting moves money from a potentially excluded asset (traditional IRA in payout status) to a countable asset (Roth IRA).
- You are within the five-year lookback window. Large financial moves close to a Medicaid application invite scrutiny.
Frequently Asked Questions
Does a Roth IRA conversion count as income for MAGI Medicaid?
Yes. The full amount of a Roth conversion is included in your taxable income and therefore increases your MAGI. If this pushes your MAGI above your state's Medicaid income threshold (typically 138% FPL in expansion states), you may lose eligibility for that year.
Is a Roth IRA considered an asset for Medicaid?
For MAGI-based Medicaid (most adults under 65), there is no asset test, so the Roth IRA balance does not matter. For long-term care Medicaid (nursing home or waiver programs), Roth IRAs are generally counted as available assets because they have no required distributions and the owner can access the full balance at any time.
Can I do a Roth conversion while on Medicaid?
You can, but the conversion income will be reported on your tax return and may affect your Medicaid eligibility at your next redetermination. If the conversion pushes your annual MAGI above the limit, you could lose coverage.
How can I protect my IRA from Medicaid?
Strategies vary by state but may include putting a traditional IRA into payout status (taking at least the RMD), using a Medicaid-compliant annuity to convert a lump sum into an income stream, or working with an elder law attorney to structure asset transfers well outside the lookback period. Never attempt to hide assets from Medicaid, as this can result in penalties and denial of benefits.
Does the Medicaid lookback period apply to Roth conversions?
A Roth conversion itself is not typically considered a disqualifying transfer because you are moving money between your own accounts. However, if you convert and then gift or spend down the Roth IRA funds shortly before applying for long-term care Medicaid, those subsequent transactions could be scrutinized under the lookback rules.
What is the difference between MAGI Medicaid and long-term care Medicaid?
MAGI Medicaid uses Modified Adjusted Gross Income to determine eligibility and does not have an asset test. It covers most adults under 65 in expansion states. Long-term care Medicaid covers nursing home stays and home-based care services, typically for individuals 65 and older, and applies both income and asset tests. The two programs use fundamentally different eligibility criteria.
Check Your Benefits Eligibility
Not sure how a Roth conversion would affect your benefits? Use our free eligibility screener to see which programs you may qualify for based on your current income and household size. The screener checks Medicaid, SNAP, ACA subsidies, and other programs all at once, and it takes less than two minutes to complete.
This article is for informational purposes only and does not constitute tax, legal, or financial advice. Medicaid rules vary by state. Consult a qualified professional before making decisions about Roth conversions or Medicaid planning.
