Renting Out the House to Pay for Assisted Living

A house can pay for care in two ways. Selling it produces one large sum that is spent down over time. Renting it produces a smaller amount every month and leaves the house in your parent's name. Families choose renting when a parent hopes to return home, when a spouse or relative may need the house later, or when they do not want to sell in a hurry.

The useful number is the net rent: what is left each month after the mortgage, property tax, insurance, repairs, any management fee and months with no tenant. Put that next to the care home's written quote. Often the net rent covers part of the bill, and Social Security, a pension or savings has to cover the rest. Our guide to what different monthly budgets tend to find can help you see where the total lands.

Renting is a small business, and your parent is no longer able to run it. Before deciding, be clear about who will do each of these jobs:

• Signing the lease. The owner signs, or someone with legal authority to act for the owner. Our guide to managing a parent's money to pay for care explains the tools in plain terms.
• Getting the house ready. Decades of belongings have to be cleared, and repairs usually come before a tenant does.
• Insurance. Ask the insurance company what policy the house needs once the owner has moved out and a tenant lives there.
• Repairs and emergencies. Someone has to answer the call when the water heater fails.
• Vacancies and late rent. The care bill is due every month whether or not the rent arrives.
• Landlord and tenant law. California and many cities have rules on deposits, rent increases and ending a tenancy. A property manager or an attorney can explain the ones that apply to the house.
• Records. Rent received and expenses paid have to be tracked for the tax return and, if your parent has benefits, for the agency.

IRS Topic 414, Rental income and expenses, says cash received for the use of real estate is taxable as rental income, and that in general an owner can deduct the expenses of renting the property from that income. Rental income and expenses from real estate are generally reported on Schedule E of Form 1040.

The topic lists depreciation, repair costs and operating expenses among the expenses, and says an owner begins to depreciate a rental property when it is placed in service. It also says advance rent is income in the year it is received, and that a security deposit is not income if it may have to be returned to the tenant.

For repairs, improvements and depreciation, Topic 414 refers owners to IRS Publication 527, Residential Rental Property. A tax professional can set the rental up correctly in the first year.

Many families rent for a while and sell later. The federal home-sale exclusion has a time test that renting can run into. IRS Publication 523, Selling Your Home (2025 edition), says a seller may qualify to exclude up to $250,000 of gain on a main home, or $500,000 on a joint return, if the seller owned the home and lived in it as a main home for at least 2 of the 5 years before the sale.

The publication adds two points that matter here. First, if a person becomes physically or mentally unable to care for themselves and used the home as a main home for at least 12 months in the 5 years before the sale, time spent living in a licensed care facility counts toward the 2-year residence requirement. Second, a seller who was entitled to depreciation because the home was a rental cannot exclude the part of the gain equal to depreciation for periods after May 6, 1997.

The result depends on dates and on your parent's own facts, so ask a tax professional before the lease is signed, not when the house is sold. Our guide to selling a house to pay for assisted living covers the sale itself.

Two questions come up: whether the house still counts as an exempt home, and how the rent is counted.

On the first, California Advocates for Nursing Home Reform (CANHR) says in its asset limit fact sheet, updated in March 2026, that the principal residence is totally excluded, that the person does not need to be living in the home at the time, and that the person indicates an intent to return home in writing. The same fact sheet says rental real property that is not the principal residence is not exempt unless it is clearly held as a business. Countable property goes toward the Medi-Cal asset limit, which the Department of Health Care Services gives as $130,000 for one person through June 30, 2027 and $21,000 for one person starting July 1, 2027.

On the second, CANHR's overview of Medi-Cal for long-term care, updated in April 2026, says that when a beneficiary receives rental income from real property, including the principal residence, the net income is used in determining the share of cost. It lists the deductions from gross rent as taxes and assessments, interest payments, insurance, utilities, and upkeep and repairs. Our guide to share of cost explains what that term means.

CANHR's overview is written about care in a skilled nursing facility. How rent is treated under other Medi-Cal programs depends on the program, so ask the county Medi-Cal office, a legal aid office or an elder law attorney. CANHR also notes that a home that is exempt for eligibility can still be subject to an estate claim after the person dies.

Supplemental Security Income (SSI) is stricter. As of October 2026, the Social Security Administration says the limit for countable resources is $2,000 for an individual and $3,000 for a couple, and that it does not count the home a person lives in. It lists land among the things it treats as resources. A house the person has moved out of and rented is a question to put to Social Security directly.

Rent matters as well. Social Security describes unearned income as all income that is not earned, and SSI is based on income as well as resources. If your parent receives SSI, report the plan to Social Security before a tenant moves in and ask how both the house and the rent would be counted.

Hamssa Benrekia is a senior living placement specialist in Torrance who works with families in the South Bay and Harbor area of Los Angeles County. She does not give tax, legal or benefits advice, and she does not manage property. Once you know what the rent and your parent's other income add up to each month, she can shortlist licensed assisted living communities and board and care homes that may fit that amount. The other money topics are in the California Assisted Living Placement Guide. To talk about homes, contact Hamssa.