On a July 29 call with the IT Working Group, HUD staff announced that they were changing the Department’s interpretation of the new HOTMA medical deduction phase-in. This change comes only a month before many HAs will send out HOTMA-compliant recertification packets and underscores how HUD is not ready for the upcoming HOTMA compliance date of January 1, 2027.
As previously covered in the Advocate, HUD has changed its guidance on eligibility for the phase-in medical hardship several times over the past few years. Earlier this year, though, the Department adamantly stated that families would only be eligible for phased-in relief if they received the medical deduction on January 1, 2024. It was unclear how HAs would be expected to verify whether families were receiving the deduction over three years before their first HOTMA-compliant recertification.
However, on the recent call, the Department reversed this guidance and stated that families would be eligible for phased-in relief if they were receiving the deduction on their most recent recertification prior to the HOTMA compliance date. While this interpretation streamlines implementation greatly, it comes as HAs are already training staff and educating residents. Further, HUD has not committed to providing written guidance in a timely manner on this latest interpretation.
PHADA continues to advocate for a delay of the compliance date until the Department, HAs, and software vendors have ample time to clarify guidance, develop technology systems, and educate residents about upcoming rent changes. At the very least, HUD should postpone the HOTMA compliance date until six months after it provides written guidance on this new interpretation so that HAs can revise recertification packets and educate residents.
Ironically, the call where HUD shared this new guidance was held on the 10th anniversary of then-President Obama signing the Housing Opportunity Through Modernization Act of 2016 into law. As a reminder to members, HOTMA mandates that the threshold for households claiming the medical deduction is increasing from three to 10 percent of a household’s adjusted annual income. Families eligible for the phased-in hardship can:
- Deduct expenses over 5% of annual income for 12 months following their first post-HOTMA annual recertification,
- Deduct expenses over 7.5% of annual income for 12 months following their second post-HOTMA annual recertification, and then
- Can only deduct expenses over 10% of annual income after subsequent recertifications.