If you live in HUD-assisted housing — Section 8, public housing, Section 202 for the elderly, or Section 811 for people with disabilities — there's a federal rule that can lower your rent every year. It's called the HUD medical expense deduction, and most tenants don't claim everything they're entitled to.
The rule comes from 24 CFR 5.611, the federal regulation that defines how your rent is calculated. Under this rule, qualifying medical expenses that exceed a certain percentage of your annual income reduce your "adjusted income" — the number used to calculate your rent. Lower adjusted income means lower rent.
About two-thirds of all HUD-assisted households are headed by an elderly or disabled person, which means roughly 3 million households across the country qualify for this deduction. But many never claim it — or claim only a fraction — because nobody explained what counts and how to track it.
This guide walks through the entire deduction: what qualifies, who's eligible, how the new HOTMA rules change the calculation in 2026, and how to document everything properly so your housing coordinator approves it at recertification.
What Is the HUD Medical Expense Deduction?
The HUD medical expense deduction is a reduction to your annual income for the purposes of calculating rent in HUD-assisted housing. It's authorized by federal regulation (24 CFR 5.611) and applies to all HUD rental assistance programs: Housing Choice Voucher (Section 8), Public Housing, Section 202 (elderly), Section 811 (disabled), and Project-Based Section 8.
Here's how it fits into the rent calculation:
- Your annual income is calculated (wages, Social Security, pensions, etc.)
- Allowable deductions are subtracted to get your adjusted income:
- $525 per dependent
- $525 elderly/disabled household deduction
- Medical expenses exceeding the threshold (the deduction this guide covers)
- Childcare expenses
- Reasonable disability assistance expenses
- Your rent is generally 30% of adjusted income
The medical expense deduction is often the single largest deduction available to elderly and disabled tenants. For someone with significant prescription costs, doctor copays, or assistance animal expenses, it can mean the difference between $400/month rent and $300/month rent.
Who Qualifies for the Deduction
The medical expense deduction is only available to elderly or disabled households. Here's exactly what that means:
- Elderly household: The head of household, spouse, or co-head is age 62 or older.
- Disabled household: The head of household, spouse, or co-head has a disability as defined by HUD (which includes physical, mental, or sensory impairments expected to be long-lasting and substantially limiting major life activities).
If your household qualifies on either basis, the medical expenses of all household members count — not just the elderly or disabled person. So if Grandma is the head of household and Grandpa, her daughter, and her two grandchildren all live with her, Grandma's eligibility unlocks the deduction for the entire family's medical expenses.
This is one of the most commonly missed aspects of the rule. People assume only the elderly person's medical bills count. They don't.
Complete List of Qualifying Medical Expenses
HUD generally follows IRS Publication 502 for what counts as a medical expense, with some specific additions in HUD Handbook 4350.3, Exhibit 5. Here's the full list:
Health care services from licensed professionals:
- Doctor and specialist visits (copays, deductibles, fees)
- Dental work (cleanings, fillings, dentures, oral surgery)
- Vision care (eye exams, eyeglasses, contact lenses, LASIK if medically necessary)
- Hearing exams, hearing aids, and hearing aid batteries
- Mental health care (therapy, counseling, psychiatry)
- Chiropractic, acupuncture, physical therapy
- Substance abuse treatment programs
Medications:
- Prescription medications (every pharmacy receipt — CVS, Walgreens, Walmart, mail order)
- Insulin and diabetic supplies
- Over-the-counter medications when prescribed by a doctor
- Vitamins and supplements when prescribed for a specific medical condition
Insurance premiums you pay yourself:
- Medicare Part B premium (deducted from Social Security but still counts)
- Medicare Part D (prescription drug plan) premiums
- Medicare Supplement (Medigap) premiums
- Long-term care insurance premiums
- Private health insurance premiums you pay out of pocket
Medical equipment and supplies:
- Wheelchairs, walkers, canes, crutches, scooters
- Oxygen tanks and oxygen equipment
- CPAP machines and supplies
- Diabetic test strips, lancets, glucose meters
- Incontinence supplies
- Medically necessary bandages, gauze, first-aid supplies
- Braille materials and assistive devices
Transportation to medical care:
- Bus or taxi fare to and from medical appointments
- Mileage if you drive yourself (current IRS medical mileage rate)
- Parking and tolls for medical visits
- Lodging if you have to travel out of area for treatment
Assistance animals (service animals and ESAs):
- Pet food (for the assistance animal)
- Veterinary care, including checkups, vaccinations, and treatments
- Grooming
- Training fees
- Supplies (leashes, harnesses, vests, beds, crates)
Attendant care:
- In-home nursing care
- Home health aides
- Adult day care (the medical portion)
For the official list, see 24 CFR 5.611 and HUD Handbook 4350.3, Exhibit 5. When in doubt, check IRS Publication 502 — HUD recommends it as the standard reference for medical expense determinations.
What Changed Under HOTMA in 2026
HOTMA — the Housing Opportunity Through Modernization Act — significantly changed how the medical expense deduction works. The biggest change: the threshold went from 3% of annual income to 10% of annual income. Only medical expenses that exceed the threshold count toward your deduction.
The increase is being phased in over three years for households that were already receiving the deduction under the old 3% rule. Here's the schedule:
- Year 1: Threshold is 5% of annual income
- Year 2: Threshold is 7.5% of annual income
- Year 3: Threshold is 10% of annual income
After the 24-month transition period, the threshold becomes 10% for everyone unless the household qualifies for a hardship exemption. New households starting after HOTMA implementation begin at the 10% threshold immediately.
Why this matters for you: as the threshold increases, more of your medical expenses get "absorbed" before any deduction kicks in. Tracking every qualifying expense becomes more important, not less, because you need a higher total to clear the threshold.
Hardship exemptions: If the new threshold causes financial hardship (your medical costs are high relative to your income but don't exceed 10%), you can request a hardship exemption from your PHA. Ask your housing coordinator about the hardship exemption process — many tenants don't know it exists.
How to Calculate Your Deduction (With Example)
The math is straightforward once you know the threshold. Here's a worked example:
Example: Margaret, age 68, Section 8 tenant
- Annual income: $18,000 (Social Security)
- Medical expenses for the year: $2,400
- $840 prescriptions (Medicare Part D copays)
- $540 doctor/specialist copays
- $320 dental work
- $300 eyeglasses + eye exam
- $240 medical transportation (bus and taxi to appointments)
- $160 service animal expenses (food, vet)
Now calculate the deduction at each threshold level:
- 5% threshold (Year 1): $18,000 × 5% = $900. Medical expenses ($2,400) − threshold ($900) = $1,500 deduction
- 7.5% threshold (Year 2): $18,000 × 7.5% = $1,350. Deduction = $2,400 − $1,350 = $1,050 deduction
- 10% threshold (Year 3): $18,000 × 10% = $1,800. Deduction = $2,400 − $1,800 = $600 deduction
Margaret's rent is 30% of her adjusted income. So at the 5% threshold, her $1,500 deduction lowers her rent by 30% × $1,500 = $450/year, or about $37/month. At the 10% threshold (Year 3), her savings drop to about $15/month — but it's still money in her pocket every month.
The implication: as HOTMA's higher threshold rolls in, Margaret needs to find morequalifying expenses to maintain the same deduction. This is why automatic tracking becomes essential — manual tracking misses too many small expenses (the $12 medical Uber, the $8 prescription copay, the $35 vet visit) that add up over a year.
How to Document Your Expenses for Your PHA
Your Public Housing Agency (PHA) requires documentation for every expense you claim. Without proper documentation, the deduction is denied. Here's what each PHA generally accepts:
- Receipts from pharmacies, doctor's offices, dentists, vets, medical equipment stores, etc. Save the original receipt — paper or digital both work.
- Pharmacy printouts showing prescriptions filled and copays paid for the past 12 months. Most pharmacies will print this on request.
- Doctor's letters estimating anticipated medical expenses for the coming 12 months — useful for things like ongoing therapy or chronic conditions where past expenses predict future ones.
- Medicare/Insurance statements showing premiums paid for Part B, Part D, and any supplement plans.
- Mileage logs if you drive yourself to medical appointments.
- Vet records and receipts for service or assistance animals, along with documentation that the animal is a reasonable accommodation.
Submit everything to your housing coordinator at your annual recertification appointment. Some PHAs require you to fill out a specific medical expense form; others just want a summary with receipts attached. Ask your coordinator which format they prefer — and make sure you have the receipts as backup either way.
Five Expenses Tenants Almost Always Miss
Even tenants who track carefully tend to miss these. Each one can add hundreds of dollars to your annual deduction:
- Service and emotional support animal expenses. Pet food, vet bills, grooming, training, supplies — all of it counts when the animal is a reasonable accommodation. For a typical service dog, this can be $1,500-$3,000 per year.
- Over-the-counter medications when prescribed. If your doctor tells you to take a daily aspirin, daily vitamin D, or any other OTC product, that's a deductible expense. Save the receipts.
- Transportation to appointments. Every bus fare, taxi ride, or mile driven to a medical appointment counts. Most people forget the small ones. $5 here and $8 there adds up to several hundred dollars per year if you have weekly appointments.
- Hearing aid batteries. They're cheap individually but expensive over a year. Save every receipt.
- Medicare Part B premium. The Part B premium is deducted directly from your Social Security check, so it doesn't feel like an out-of-pocket expense. But it still counts as a medical expense for HUD purposes. This one is huge — $174.70/month in 2025 means over $2,000/year in qualifying expenses you might be missing.
How to Track Everything Automatically
The hardest part of claiming this deduction isn't understanding the rules — it's keeping track of every receipt for an entire year. Most people start strong in January and stop tracking by April. By recertification time, half the receipts are missing.
ExpenseBot solves this by scanning your Gmail automatically. Every receipt that comes to your inbox — from CVS, Walgreens, your doctor's office, your dentist, Chewy (for service animal food), the eye doctor — gets captured, tagged as medical, and added to a single Google Sheet you own.
When recertification time comes, click one button. ExpenseBot generates a complete worksheet with:
- Grand total at the top (the number your PHA wants to see)
- Every line item sorted by date
- Subtotals by category
- Original receipts attached as backup
- Date range covering the past 12 months
You print it, bring it to your housing coordinator, and that's it. No shoebox of receipts. No reconstructing the year from memory. No missed deductions.
See how it works on the HUD Medical Expense Tracker page, or learn more about how Gmail receipt scanning works. There's also a free expense tracker template if you'd rather track things manually in Google Sheets.
Frequently Asked Questions
How much can the HUD medical expense deduction lower my rent?
Most HUD tenants pay 30% of their adjusted income in rent. Every $1,000 of medical expense deduction lowers your annual income (for rent purposes) by $1,000, which lowers your rent by about $25/month or $300/year. A typical elderly tenant with $3,000 in qualifying medical expenses can save $400-$700 per year in rent depending on the HOTMA threshold year.
Do I need to be elderly AND disabled to qualify?
No. You qualify if the head of household, spouse, or co-head is either age 62 or older OR has a disability. You don't need both. If anyone in those positions meets the requirement, the medical expenses of the entire household count — including children and other family members.
What happens if I don't have receipts?
Without receipts or documentation, your PHA cannot give you the deduction. Some PHAs accept printouts from your pharmacy showing prescriptions filled. Some accept doctor's letters estimating expected expenses. The safest approach is to save every medical receipt as it comes in — or use a tool like ExpenseBot that captures receipts from your Gmail automatically so you never lose one.
Can I deduct medical expenses for someone else in my household?
Yes. If you qualify for the deduction (head, spouse, or co-head is elderly or disabled), the medical expenses of all household members count — including children, other relatives, and anyone else listed on your lease. This is one of the most overlooked aspects of the rule.
How far back do my medical expenses need to be?
HUD looks at the past 12 months of medical expenses for your annual recertification. You can also estimate anticipated expenses for the coming 12 months based on regular treatments, ongoing prescriptions, or doctor letters. Your PHA may use either historical or anticipated expenses, depending on which gives you the larger deduction.
What is HUD Handbook 4350.3 and where can I find it?
HUD Handbook 4350.3 is the official guidance document HUD publishes for occupancy requirements in multifamily housing programs. Exhibit 5 of the handbook contains the detailed list of allowable medical expense deductions. Your local PHA or property manager should have a copy, and it's also available on HUD's website. The list closely follows IRS Publication 502, which HUD recommends as the standard.
This guide is informational and not legal or financial advice. Always confirm deduction eligibility with your Public Housing Agency. ExpenseBot is not affiliated with HUD or any government agency.