HOTMA Questions Staff Are Actually Asking
- Lisa Viles
- 3 days ago
- 9 min read
23 practical answers for the file in front of you
HOTMA is not difficult because there is no guidance.
It is difficult because real files do not arrive neatly labeled:
“This is an asset exclusion.”
“This requires an interim.”
“This is student financial assistance.”
“This EIV result needs third-party verification.”
Instead, staff receive a pay stub, retirement statement, medical bill, scholarship letter, household change, or system report and must determine which rule applies.
The goal is not to memorize every HOTMA regulation.
The goal is to know what questions to ask, what facts to verify, what policy applies, and what belongs in the file.
THE FILE-FIRST RULE Before classifying anything, ask: What exactly is being reported? Who does it belong to? Which rule applies? What supports the decision? What does the agency’s adopted policy require?
Let’s walk through some of the questions housing staff are actually asking.
Current Values, Policies and Interim Reexaminations
1. Which dollar amounts should staff use when the policy document shows an older figure?
Use the HUD inflation-adjusted amount effective for the examination date and your agency’s current approved implementation direction.
For agencies applying the relevant HOTMA provisions in 2026:
Asset limitation: $105,574
Asset self-certification threshold: $52,787
Dependent deduction: $500
Elderly or disabled family deduction: $550
Passbook savings rate: 0.40%
Do not continue using an outdated amount simply because it remains printed in an older policy document. At the same time, do not apply a future year’s amount before its effective date.
HUD’s 2026 Inflation-Adjusted Values should be reviewed alongside current implementation guidance and the agency’s governing documents.
2. Are Public Housing and HCV rules interchangeable?
No.
An agency may align its approach across programs where HUD permits, but the controlling authority remains program-specific:
The ACOP governs Public Housing.
The Administrative Plan governs HCV.
Always confirm the program before selecting the citation, policy, notice, or hearing procedure that applies.
3. Does every reported income change require a full interim reexamination?
Not necessarily.
A family’s responsibility to report a change is separate from the agency’s responsibility to
process that change as a full interim reexamination.
Staff should first determine:
whether the change was reported within the timeframe required by agency policy;
whether it meets the applicable interim threshold;
whether a household-composition change occurred;
whether an exception applies; and
what effective-date rule governs the action.
Do not tell families to report only the changes staff believe will affect rent. Apply the agency’s reporting and interim-processing policies separately.
4. Does every PHA use the same interim threshold?
No.
HOTMA establishes the federal framework, but PHAs have certain policy choices, including whether to adopt a lower threshold for decreases.
The answer must come from the agency’s formally adopted ACOP or Administrative Plan—not from what another housing authority chose to do.
Assets and Retirement Accounts
5. How is a 401(k) treated under HOTMA?
This is the question staff are asking everywhere right now.
The simplest way to answer it is:
Follow the money.
Money still inside the plan
The balance and earnings held inside a qualifying IRS-recognized retirement account are excluded from net family assets.
That generally includes qualifying:
traditional 401(k) plans;
Roth 401(k) plans;
Safe Harbor 401(k) plans;
SIMPLE 401(k) plans;
Solo or one-participant 401(k) plans;
403(b) and 457(b) plans;
traditional and Roth IRAs; and
other bona fide IRS-recognized retirement arrangements.
Money redirected from the employee’s pay
A voluntary 401(k) payroll contribution is not a HUD income deduction.
If a pay stub shows $200 being placed into the employee’s 401(k), staff should not automatically subtract that $200 from countable wages.
The contribution may affect taxable wages for IRS purposes, but that does not make it a HUD deduction.
Money paid to the family
The treatment depends on how it is paid:
Periodic retirement distributions generally count as income when received.
A legitimate nonperiodic withdrawal is generally excluded from annual income.
Funds retained outside the retirement plan must then be evaluated under the normal asset rules.
The question is not simply, “Does the family have a 401(k)?”
The question is:
Is the money inside the plan, redirected from pay, or paid to the family?
For a complete breakdown, read: 401(k)s Under HOTMA: What Is Excluded, What Is Included, and What Happens After a Withdrawal. ~ Coffee & Compliance
6. What happens with a 401(k) loan, hardship withdrawal, or rollover?
A genuine 401(k) loan is treated as loan proceeds and excluded from annual income.
However:
repayment of the loan is not a HUD income deduction; and
loan proceeds retained by the family may need to be evaluated under the asset rules.
A genuine direct rollover from one qualifying retirement plan to another generally remains within the retirement-account exclusion because the funds were not paid to the family.
A one-time hardship or lump-sum withdrawal is generally excluded from annual income as a nonperiodic retirement distribution. Staff must still determine what happened to the money afterward.
7. Do we stop collecting all 401(k) information because the account is excluded?
No.
The file still needs enough information to establish:
the type of plan;
whether it is a qualifying retirement account;
whether the document shows a balance, contribution, loan, rollover, or distribution;
whether a payment is periodic or nonperiodic; and
where withdrawn funds went.
An excluded account does not mean an undocumented account.
8. Can the family self-certify its assets below the applicable threshold?
HOTMA provides specific authority to accept a family’s self-certification when net family assets are at or below the applicable threshold.
For 2026, that threshold is $52,787 for agencies applying the applicable HOTMA provision.
This should not be confused with using self-certification as the last level of the general verification hierarchy.
The asset self-certification rule is a specific regulatory authority.
9. What if the family is below the threshold but the file contains a red flag?
Pause and verify.
Additional verification may be appropriate when the file contains:
conflicting information;
an undisclosed account;
unusual asset transfers;
unclear ownership;
inconsistent statements; or
information suggesting that the certification may not be complete.
Document the conflict, the verification obtained, and how the issue was resolved.
10. What happens when an existing family exceeds the asset limitation?
Follow the agency’s formally adopted asset-enforcement policy.
The file should clearly establish:
the calculated net family assets;
whether an exception applies;
whether the family can cure the condition;
the notice provided;
the deadline provided under agency policy; and
the applicable grievance or hearing rights.
Do not treat an applicant decision and an existing-family decision as though they are automatically the same.
11. Does owning real property automatically make a family ineligible?
No.
Staff must determine whether the property is suitable for occupancy and whether a regulatory exception applies.
The review may include:
physical condition;
accessibility;
household size and needs;
location;
legal availability;
ownership interest; and
whether the family can actually occupy the property.
A deed or property record begins the review. It does not necessarily end it.
Income Exclusions and Deductions
12. What is the difference between an income exclusion and a deduction?
An income exclusion keeps an amount out of annual income.
A deduction is applied afterward to determine adjusted income.
That distinction matters because some eligibility tests specifically require annual income.
Do not subtract a medical expense, dependent deduction, or voluntary retirement contribution from a calculation that requires annual income.
HALFWAY-THERE HOTMA BREAK
If HOTMA has you wondering whether your own brain qualifies for a hardship exemption, this is your sign to pause.
Refill your coffee, take a breath, and hang in there.
You already understand more than you did five questions ago, and no additional verification is required before taking this break.
13. Who qualifies for the health and medical expense deduction?
The mandatory health and medical expense deduction is available to an elderly family or disabled family.
Staff should combine verified qualifying unreimbursed health, medical, and eligible disability-assistance expenses and deduct only the amount exceeding the applicable threshold.
The file must also establish that the expense:
qualifies under the applicable definition;
was not reimbursed by insurance or another source;
was not counted under another deduction;
belongs to the applicable period; and
is supported by acceptable verification.
14. Is the medical-expense threshold still 10 percent?
The general mandatory threshold under 24 CFR 5.611 is 10 percent of annual income.
However, qualifying families may receive:
phased-in hardship relief;
general medical or disability hardship relief; or
an additional or permissive deduction formally adopted by the PHA when HUD permits it.
Do not automatically use a lower threshold simply because the family has high expenses.
Likewise, do not deny a hardship request without reviewing the agency’s adopted hardship policy.
15. What deductions should staff remember?
The primary mandatory deductions include:
dependent deduction;
elderly or disabled family deduction;
qualifying health and medical expenses;
qualifying disability-assistance expenses; and
qualifying child-care expenses.
Remember: deductions are applied after annual income is determined.
16. When does child care qualify?
Generally, the child-care expense must be:
for a child under age 13;
reasonable;
unreimbursed; and
necessary to allow a family member to work, actively seek work, or further their education.
Employment-related child-care deductions are also limited by the amount of included employment income.
If the deduction would otherwise end and the family would be unable to pay rent without it, the family may request hardship relief under the agency’s adopted policy.
Student Eligibility, Earnings and Financial Aid
17. Is student eligibility the same as calculating student income?
No.
These are separate questions.
The special restriction at 24 CFR 5.612 applies to certain Section 8 students enrolled in institutions of higher education and living apart from their parents.
Staff must determine whether the student meets an exception, such as:
being age 24 or older;
being married;
being a veteran;
having a dependent child;
qualifying under applicable disability provisions;
being a graduate or professional student; or
meeting an applicable independent-student or vulnerable-youth standard.
Passing the student restriction does not automatically establish eligibility under every other program requirement.
18. Are all student wages excluded?
No.
The answer depends on the student’s age, full-time status, dependency status, and position in the assisted family.
For example, in 2026, a dependent full-time student age 18 or older generally has up to $500 of earned income included, with earned income above that amount excluded.
That rule does not apply in the same way to a head, spouse, or co-head who is a student.
The dependent deduction is also a separate calculation.
19. Is all student financial assistance excluded?
No.
Classify the assistance in the correct order:
Identify the student’s actual covered costs.
Exclude assistance that the Higher Education Act requires to be excluded.
Determine the remaining covered-cost gap.
Apply other qualifying grants or scholarships only up to that remaining gap.
Evaluate any excess under the remaining income rules.
Student loan proceeds are excluded as loan proceeds.
Work-study, fellowships, gifts, and assistance above covered costs may require separate analysis.
EIV, SAVE and File Documentation
20. Does an EIV income discrepancy prove fraud?
No.
An EIV discrepancy is an investigation lead—not an automatic finding of fraud or unreported income.
Staff should:
compare the correct income periods;
check exclusions;
rule out data-entry or agency errors;
allow the family to explain;
obtain required verification;
recalculate when necessary; and
document whether the discrepancy was valid or invalid.
21. What if the family disputes EIV information?
Obtain verification from the source for the disputed information.
EIV should not override credible current documentation merely because its information is delayed, incomplete, or based on a different period.
Similarly, an EIV No Income Report does not prove that the family has no income.
Interview the family, verify reported sources, and document the conclusion.
22. Must EIV be run for every interim reexamination?
HOTMA removed the federal requirement to use EIV in its entirety for every interim reexamination.
A PHA may choose to continue using EIV at interims, but that choice should appear in the agency’s formally adopted ACOP or Administrative Plan and must be applied consistently.
Follow the agency’s policy rather than assuming that every PHA uses the same procedure.
23. Does an initial SAVE non-confirmation mean the person is ineligible?
No.
Staff should:
review the information entered;
correct data-entry errors;
follow required additional-verification steps;
allow the individual to provide or correct documentation;
preserve the SAVE case response; and
provide the notice and review rights required before an adverse decision.
SAVE verifies immigration-status information.
SAVE does not make the housing-program eligibility decision. The housing agency applies the program rules and makes that decision.
What Makes the File Review-Ready?
Before completing the action, ask whether the file contains:
ASK
What changed, and who does it belong to?
VERIFY
Was the highest appropriate verification level used, and is the reason for any fallback documented?
CLASSIFY
Is this eligibility, annual income, an income exclusion, an asset, an asset exclusion, an adjusted-income deduction, or hardship relief?
CALCULATE
Does the file show the period, annualization, threshold, deduction, effective date, and HUD value used?
DOCUMENT
Does the file contain the evidence, reasoning, family contact, calculation, notice, approval, and applicable appeal rights?
THE FINAL FILE TEST Another trained staff member should be able to reproduce the decision without guessing.
When a case does not fit cleanly into a rule, pause.
Verify the facts.
Check the current policy.
Review the applicable HUD source.
Document the issue.
Escalate before completing the action.
That is not uncertainty.
That is good compliance.
Primary Resources
This post is a training and educational resource. PHAs and owners should apply current HUD guidance, program-specific requirements, and their formally adopted policies and procedures.
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