D. Medical Expense Deduction
HUD Handbook 4350.3 REV-1 — Occupancy Requirements of Subsidized Multifamily Housing Programs · 2026 edition · updated 2026-10-05 · United States
The medical expense deduction is permitted only for families in which the head, spouse, or co-head is at least 62 years old or is a person with disabilities (elderly or disabled families).
If the family is eligible for a medical expense deduction, owners must include the unreimbursed medical expenses of all family members, including the expenses of nonelderly adults or children living in the family.
Medical expenses include all expenses the family anticipates to incur during the 12 months following certification/recertification that are not reimbursed by an outside source, such as insurance.
The owner may use the ongoing expenses the family paid in the 12 months preceding the certification/recertification to estimate anticipated medical expenses.
The medical expense deduction is that portion of total medical expenses that exceeds 3% of annual income.
HUD Occupancy Handbook Chapter 5: Determining Income & Calculating Rent
6/07
5-46
Section 2: Determining Adjusted Income
4350.3 REV-1
| Example | – Calculating the Medical Expense Deduction | – Calculating the Medical Expense Deduction | |
|---|---|---|---|
| Age of head | 64 | Annual income | $12,000 |
| Age of spouse | 58 | Total medical expenses | $1,500 |
| Sample Calculation | |||
| Annual income | $12,000 | ||
| x .03 | |||
| 3% of annual income | $ 360 | ||
| Total medical expenses | $1,500 | ||
| -$360 | |||
| _Allowable_medical expenses | $1,140 |
In addition to anticipated expenses, past one-time nonrecurring medical expenses that have been paid in full may be included in the calculation of the medical expense deduction for current tenants at an initial, interim or annual recertification. Past one-time nonrecurring medical expenses that have been paid in full are not applicable when calculating anticipated medical expenses at move-in. If the tenant is under a payment plan, the expense would be counted as anticipated
- a. There are two options for addressing one-time medical expenses. These expenses may be added to the family’s total medical expenses either: (1) at the time the expense occurs, through an interim recertification, or (2) at the upcoming annual recertification
NOTE: If the one-time expense is added at an interim recertification, it cannot be added to expenses at the annual recertification.
- b. The following example illustrates the two options. Tenants may use either option.
HUD Occupancy Handbook Chapter 5: Determining Income & Calculating Rent
6/07
5-47
Section 2: Determining Adjusted Income
4350.3 REV-1
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