What can my father do when he owes both federal and state income tax but has no money left?

You would need to talk to a professional about this situation. An Elder Law Attorney could guide you in the right direction.

Too bad you are paying for the upkeep on the house, which means property taxes, utilities, outside maintenance, inside maintenance and cleaning, and if the house if vacant, much higher homeowner's insurance. The Elder Law Attorney could give you idea on how to sell the house to pay the income taxes and self-pay on the nursing home then Medicaid could start up again after that.