Section 8 Medical Expense Deduction: HOTMA Threshold and Rent Impact

The Section 8 medical expense deduction lets elderly or disabled voucher households subtract unreimbursed medical costs that exceed 10% of their annual income from the income figure used to calculate rent.¹ Because your monthly rent contribution is 30% of adjusted monthly income, every dollar deducted lowers what you pay. Families already claiming the deduction in early 2024 are being phased into the 10% threshold gradually, so the number that applies to you this year may still be 5% or 7.5%.

Who Qualifies

The deduction is available only to elderly or disabled families. To meet that classification, the head of household, co-head, or spouse must be at least 62 years old or have a qualifying disability. A qualifying disability is a physical, mental, or emotional impairment that is expected to last indefinitely and substantially limits independent living, or a disability as defined under Social Security law.²

Once the family qualifies, the unreimbursed medical expenses of every person in the unit count, not just the elderly or disabled member’s. A grandchild’s dental bill and an adult child’s prescription copays are eligible alongside the qualifying member’s own costs. Households that don’t meet the elderly or disabled test for the head, co-head, or spouse cannot claim any medical expense deduction.

What Counts as a Medical Expense

Federal rules define eligible costs broadly: any expense for the diagnosis, treatment, mitigation, cure, or prevention of disease, plus payments for treatments affecting any structure or function of the body.³ The expense must be unreimbursed, meaning insurance, Medicaid, or another program hasn’t already paid for it. Typical qualifying costs include:

Health insurance premiums, including Medicare Part B, Part D, supplemental plans, and long-term care insurance
Prescription drug copays and out-of-pocket costs
Dental care, orthodontics, eye exams, glasses, and contact lenses
Hearing aids, batteries, and maintenance
Wheelchairs, walkers, prosthetics, and similar durable medical equipment
Wages paid to a home health aide or in-home nursing help
Food, veterinary care, and upkeep for an approved service or assistance animal⁴
Transportation to medical appointments, either by mileage (the IRS standard medical rate is 20.5 cents per mile for 2026) or by bus and taxi fares⁵

Over-the-counter medications and nutritional supplements are deductible only when a licensed medical practitioner recommends them in writing for a specific diagnosed condition, naming the condition and the product.⁴ A general suggestion to take vitamins won’t qualify. Cosmetic procedures, gym memberships, general wellness purchases, and anything already reimbursed by insurance are excluded.

A separate but related category covers disability assistance expenses, such as attendant care or adaptive equipment that enables an adult in the household to work. Those costs are added to medical expenses before the threshold is applied, but they’re capped at the earned income the care makes possible.¹

The 10% Threshold and How the Math Works

Only the portion of unreimbursed medical (and disability assistance) expenses that exceeds 10% of the household’s annual income is deductible.¹ The threshold used to be 3%. It was raised under the Housing Opportunity Through Modernization Act (HOTMA), which took effect for this program in 2024.

The calculation is simple. Take a family with $18,000 in annual income and $4,500 in unreimbursed medical costs:

10% of annual income: $18,000 × 0.10 = $1,800
Deductible amount: $4,500 − $1,800 = $2,700

The $2,700 comes off annual income before rent is calculated. If the same family’s medical bills totaled $1,500, nothing would be deductible because the total sits below the $1,800 threshold. That’s the sting of the higher percentage: modest but genuine medical costs may not clear the bar.

What This Means for Your Rent

Your monthly rent contribution (the Total Tenant Payment) is generally 30% of your monthly adjusted income, subject to a floor of 10% of monthly gross income or the housing authority’s minimum rent, whichever is greater.⁶ Every dollar of medical deduction reduces adjusted income and, through that 30% calculation, your rent.

In the example above, the $2,700 annual deduction translates to $225 less in monthly adjusted income. At 30%, that’s about $67.50 off the monthly rent. For a household living on $1,500 a month, that’s meaningful. Families with heavier medical burdens, such as in-home care, ongoing prescriptions, or premiums on multiple insurance plans, can see much larger reductions.

The HOTMA Phase-In

Families already receiving the medical expense deduction under the old 3% rule as of January 1, 2024 don’t jump straight to 10%. HUD created a phased transition that eases the threshold up over two years:⁷

First 12 months: 5% threshold
Next 12 months: 7.5% threshold
After 24 months: 10% threshold permanently

The clock starts at the family’s first annual or interim reexamination after the housing authority begins the phase-in.¹ Housing authorities implemented HOTMA on different dates through 2024, so ask your caseworker which threshold currently applies to your household. Families that entered the voucher program after January 1, 2024, or who weren’t claiming the deduction on that date, go directly to 10% with no phase-in.

Hardship Relief From the Higher Threshold

If the 10% threshold makes it difficult to afford rent, you can request a general hardship exemption. The housing authority may apply a lower threshold for a 90-day period and can renew it for additional 90-day periods at its discretion if the hardship continues.⁸ The agency has to notify you in writing when the exemption begins and expires. Because renewals aren’t automatic, contact your caseworker before the expiration date if the hardship is ongoing.

Documenting Your Expenses

The deduction is based on anticipated costs for the coming year, but housing authorities estimate that figure from what you’ve spent recently.³ Bring 12 months of records:

A year-end pharmacy printout listing each prescription, fill date, and your out-of-pocket cost
Itemized billing statements from doctors, dentists, specialists, and hospitals showing what insurance covered and what you owed
Records of insurance premium payments, including Medicare Part B or Part D amounts deducted from Social Security
A mileage log with dates, destinations, and round-trip miles for medical trips, or receipts for bus and taxi fares
The written practitioner recommendation for any over-the-counter items or supplements you’re claiming
Pay stubs or a written agreement for any home health aide, showing hourly rate and hours

Many housing authorities hand out a medical expense worksheet. Filling it in before your appointment helps you catch recurring costs you might otherwise forget. Solid tenant-provided documentation also speeds up verification; when caseworkers have to chase down providers directly, the rent adjustment can be delayed by weeks.

How and When to Claim It

The standard time to claim or update the deduction is at your annual recertification. Bring your documentation to that appointment. If medical costs rise sharply between annual reviews, such as starting a new $400-a-month medication or beginning in-home care, you can request an interim reexamination rather than waiting.⁹ Housing authorities generally must act on interim requests within 30 days, though they can decline to process one if they estimate it would reduce adjusted income by less than 10%.

Once the calculation is done, the agency sends a written notice with your new rent and its effective date. Read it carefully. Confirm that every expense you submitted appears in the math and that the threshold percentage matches what should apply to your household under the phase-in.

If You Disagree With the Result

You can request an informal hearing if you think the housing authority miscalculated your income, misapplied the deduction, or used the wrong threshold.¹⁰ The rent adjustment notice must inform you of this right. At the hearing you can review the agency’s documents, present your own evidence, question witnesses, and bring a lawyer or other representative at your expense. The hearing officer cannot be the person who made the original decision, and you’re entitled to a written decision explaining the reasoning. Common disputes involve excluded expenses, disagreements about how much insurance reimbursed, and the wrong phase-in threshold being applied.

1
eCFR. 24 CFR 5.611 – Adjusted Income
2
eCFR. 24 CFR 5.403 – Definitions
3
eCFR. 24 CFR 5.603 – Definitions
4
U.S. Department of Housing and Urban Development. HUD Occupancy Handbook 4350.3 REV-1, Exhibit 5-3
5
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile, Up 2.5 Cents
6
U.S. Department of Housing and Urban Development. Calculating Rent and Housing Assistance Payments
7
U.S. Department of Housing and Urban Development. Notice PIH 2023-27 – HOTMA Implementation
8
eCFR. 24 CFR 5.611 – Adjusted Income
9
eCFR. 24 CFR 982.516 – Family Income and Composition
10
eCFR. 24 CFR 982.555 – Informal Hearing for Participant