--- title: "Part IX, Subpart i, Chapter 3, Section D Reduction of Income Due to Unreimbursed Expenses" document: "M-21-1" section: "Part IX, Subpart i, Chapter 3, Section D" canonical: "https://veteranai.co/va-regulations/m21-1/ix.i.3.d-reduction-of-income-due-to-unreimbursed-expenses" source: "https://www.knowva.ebenefits.va.gov/system/templates/selfservice/va_ssnew/help/customer/locale/en-US/portal/554400000001018/content/554400000178519/M21-1-Part-IX-Subpart-i-Chapter-3-Section-D-Reduction-of-Income-Due-to-Unreimbursed-Expenses" updated: "2026-09-07T14:37:43.293943Z" --- February 8, 2023 ### IX.i.3.D.1.a. Authority Under Which UMEs Are Deductible The authority for allowing unreimbursed medical expenses (UMEs) under * current-law pension is [38 CFR 3.272(g)](), and * Parents’ Dependency and Indemnity Compensation (DIC) and Section 306 Pension is [38 CFR 3.262(l)](). **Note:** UMEs can be used to reduce countable income for current-law pension, Section 306 Pension, and Parents’ DIC purposes. ### IX.i.3.D.1.b. Determining Deductible Expenses UMEs are not deducted from a claimant’s income on a dollar-for-dollar basis.Use the table below to determine what medical expenses are deductible from a claimant’s income.| **If the case involves ...**| **Then UMEs that exceed 5 percent of the ...** current-law pension| applicable maximum annual pension rate (MAPR) are deductible. **Note:** When determining the 5-percent deductible, use the MAPR that corresponds to the applicable number of dependents. However, do not calculate the 5-percent deductible based off of the increased rate for aid and attendance (A&A) or housebound status. **Example 1:** The MAPR for a Veteran without dependents effective December 1, 2020, is $13,931. The Veteran must have medical expenses in excess of $696 ($13,931 x .05) in order for the expenses to have any effect on the rate of pension._**Example 2**_ : The MAPR for a Veteran with one dependent in receipt of A&A effective December 1, 2020, is $27,549. The 5-precent deducible is calculated based off of the basic rate of pension with a Veteran and one dependent ($18,243) and not the increased rate with aid and attendance ($27,549). Therefore, the Veteran must have medical expenses in excess of $912 ($18,243 x .05) in order for the expenses to have any effect on the rate of pension. _**Reference**_ : For more information on the current and historical MAPR, for * Veterans, see the [Veterans Pension rate tables](), and * survivors, see the [Survivors Pension rate tables](). Section 306 Pension or Parents’ DIC| claimant’s reported annual income are deductible. **Example:** If reported annual income is $4,000, the claimant must have medical expenses of at least $200 in order for the expenses to have any effect on the rate of benefits. ### IX.i.3.D.1.c. Impact of Deductible Medical Expenses on a Section 306 Pension Rate As indicated in [M21-1, Part IX, Subpart i, 1.3.b](), beneficiaries receiving Section 306 Pension cannot get a rate increase by reporting changes in income.Per [M21-1, Part IX, Subpart iii, 1.C.3.e](), the only time medical expenses are relevant to a Section 306 Pension case is if income would otherwise exceed the income limit. Medical expenses _can_ be used to enable a Section 306 pensioner to continue to receive the protected rate when income would otherwise cause the award to be discontinued for excessive income._**Reference**_ : For more information on Section 306 Pension rates, see the [protected pension rates](). ### IX.i.3.D.1.d. Medical Expense Deduction Allowed Before Expenses Are Incurred In most instances, the medical expense deduction is allowed after the fact.However, if a claimant has consistently recurring UMEs, it may be possible to allow the medical expense deduction on a continuing basis.Examples of common recurring medical expenses allowed prospectively on a continuing basis are: * nursing home or other care facility expenses * payments to an in-home attendant * recurring prescriptions, and * health or hospitalization insurance premiums, including Medicare premiums. _**Note**_ : Life insurance and burial insurance are not allowable medical expense deductions._**Reference**_ : For more information on sources of medical expenses, processing UME deductions, and verifying medical expenses, see * [M21-1, Part IX, Subpart iii, 1.G.3-5](), and * [38 CFR 3.278](). ## 2. Developing for UMEs This topic contains information on developing for UMEs, including * using _VA Form 21P-8416, Medical Expense Report_ , when development is needed, and * cases that require additional development. July 30, 2015 ### IX.i.3.D.2.a. Using VA Form 21P-8416 When Development Is Needed If development for medical expenses is needed, send the beneficiary [__VA_ Form 21P-8416, Medical Expense Report_]().**Notes:** * In a Parents’ DIC or Section 306 Pension case, always develop for medical expenses using the calendar year period (January 1 through December 31). * In a current-law pension case, the development period may be the 12-month initial year period _or_ the calendar year period, depending on which period medical expenses applies. **References:** For more information on * determining the reporting period, see [M21-1, Part IX, Subpart i, 3.A.3](), and * written requests for evidence, see [M21-1, Part III, Subpart i, 2.D.1.a](). ### IX.i.3.D.2.b. Cases That Require Additional Development In some cases, particularly those involving nursing home fees, additional development may be necessary to determine if the claimant will be reimbursed for some of the medical expenses, since only UMEs are allowed. Use _[VA Form 21P-8416]()_ __ to obtain the beneficiary’s statement as to the level of UMEs. _**References**_ : For more information on * developing for nursing home fees, see [M21-1, Part IX, Subpart iii, 1.G.3.j](), and * the required fields for [_VA Form 21P-8416_](), see [M21-1, Part IX, Subpart iii, 1.G.4.c-e](). ## 3. Developing for Unreimbursed Funeral and Other Final Expenses This topic contains information on developing for unreimbursed funeral and other final expenses, including * applicability of deductions for final expenses * definition of last illness * do not deny a deduction for expenses of last illness previously claimed * definition of * burial expenses and allowable deductions, and * just debts * allowing or denying a deduction for just debts * example of denying a deduction for just debts * determining allowable final expenses, and * developing for final expenses. April 20, 2026 ### IX.i.3.D.3.a. Applicability of Deductions for Final Expenses A claimant’s income for Department of Veterans Affairs (VA) purposes may be reduced by deducting amounts paid for certain funeral and other last expenses. Allow a deduction _only_ for expenses actually paid by the claimant that will not be reimbursed.Final expenses are a factor in * current-law pension cases, per [38 CFR 3.272(h)]() * Parents’ DIC cases, per [38 CFR 3.262(o)](), and * Section 306 Pension cases, per [38 CFR 3.262(n)](). ### IX.i.3.D.3.b. Definition: Last Illness The term **_last illness_** means the period from the onset of the acute attack causing death up to the date of death.If death resulted from a lingering or prolonged illness instead of an acute attack, the period of last illness is considered to have begun at the time the person became so ill as to require the regular and daily attendance of another person. ### IX.i.3.D.3.c. Do Not Deny a Deduction for Expenses of Last Illness Previously Claimed Do not deny a deduction for expenses of last illness if those same expenses have been reported to VA as UMEs._**Note**_ : An individual can claim they _bore the expense_ of a claimant’s last illness or final expenses, even if the deceased beneficiary claimed those same funds as unreimbursed expenses to reduce their income for VA purposes on an income-based benefit program (i.e., Pension or Survivor’s Pension)._**References**_ : For more information on * allowing deduction for expenses of last illness, see _Helmick v. McDonough_ , 34 Vet.App. 141 (May 25, 2021), and * the definition of bore the expense, see [M21-1, Part XI, Subpart ii, 3.A.6.b](). ### IX.i.3.D.3.d. Definition: Burial Expenses and Allowable Deduction The term **_burial expenses_** includes all funeral and burial expenses incident to disposition of the remains of deceased persons. **Notes:** * Claims processors should deduct the amount reported by the claimant as an unreimbursed final expense, unless the claimant submits a funeral statement, or one is of record that differs from the amount reported. If the total amount on the funeral statement differs from the final expense amount reported by the claimant, use the lowest total amount and include information in the notification letter. * All expenses listed on a funeral statement of account will be considered acceptable, including * clergy * copies of death certificates * flowers * funeral service announcements, and * organist. **Reference:** **__** For more information regarding burial expenses, see * [M21-1, Part IX, Subpart iii, 1.K.1.c](), and * [38 U.S.C. 2303](). ### IX.i.3.D.3.e. Definition: Just Debts The term _**just debts**_ refers to any debt that would be recognized by a probate court, meaning that the debt is legally enforceable and not fraudulent. ### IX.i.3.D.3.f. Allowing or Denying a Deduction for Just Debts Allow for a deduction _only_ for debts that are the debts of a * Veteran, when paid by the Veteran’s surviving spouse or child, or * DIC parent, when paid by the surviving spouse. Deny a deduction when a surviving spouse or surviving parent pays debts that were incurred jointly with the deceased person for the purchase of real or personal property, including a jointly incurred charge card debt. ### IX.i.3.D.3.g. Example: Denying a Deduction for Just Debts ** _Situation_** : * A surviving spouse claims a deduction for payment of just debts of the Veteran. * Development reveals that the * spouse has been making payments on a car note, and * Veteran and surviving spouse were joint obligors on the note. **Result:** * Payments on the car note are not deductible as just debts of the Veteran because the debt was jointly incurred by the survivor and the Veteran for the purchase of real or personal property (the car). * No further development of the claimed expense is necessary. ### IX.i.3.D.3.h. Determining Allowable Final Expenses Use the table below to determine allowable final expenses by beneficiary type.| **If the case involves ...**| **Then allowable final expenses, include amounts paid by a ...** Veterans Pension benefits| Veteran for expenses of last illness and burial of the Veteran’s deceased spouse or child. Survivors Pension benefits| * surviving spouse for expenses of the * Veteran’s last illness and burial (even if paid before the Veteran’s death), and the Veteran’s just debts paid after the Veteran’s death, or * last illness and burial of the Veteran’s child, and * child after the Veteran’s death for expenses of the Veteran’s last illness, burial, and just debts. **References:** For more information on * final expenses paid by a surviving spouse prior to the date of pension entitlement, see [M21-1, Part IX, Subpart iii, 1.K.1.g](), and * periods to deduct final expenses, see [M21-1, Part IX, Subpart iii, 1.K.2.a](). Parents’ DIC benefits| parent for expenses of * the deceased Veteran’s last illness and burial, and * the spouse’s last illness, burial, and just debts. Section 306 Pension benefits| * Veteran for expenses of last illness and burial of a deceased child or spouse, or * surviving spouse for expenses of last illness and burial of the Veteran’s child. **Note:** This deduction is used only when needed to keep a beneficiary’s income within the applicable income limit.**Reference:** For more information on the effect of income limits for Section 306 Pension benefits, see [M21-1, Part IX, Subpart i, 1.3.c](). ### IX.i.3.D.3.i. Developing for Final Expenses The Survivors Pension application form, [_VA Form 21P-534EZ, Application for DIC, Survivors Pension, and/or Accrued Benefits_](),__ provides space for reporting final expenses. When developing for final expenses, refer to the _Expenses of Last Illness and Burial of Veteran, Spouse, or Child and Just Debts of Deceased Veteran or Parent’s Spouse_ block of [_VA Form 21-8049, Request for Details of Expenses_]().**Note:** The Veterans Benefits Management System (VBMS) should be used for development whenever possible.**References:** For more information on * development procedures that contain Federal tax information, see [M21-1, Part IX, Subpart iii, 1.A.2.h](), and * generating letters with automated tools, see * [M21-1, Part III, Subpart i, 2.D.1.a](), and * the _VBMS User Guide_. ## 4. Developing for Unreimbursed Educational Expenses This topic contains information on developing for unreimbursed educational expenses, including * applicability of the educational expense deduction to a Veteran or surviving spouse payee * developing for educational expenses for a Veteran or surviving spouse payee * applicability of the educational expense deduction to children, and * developing for a child’s educational expenses. March 31, 2021 ### IX.i.3.D.4.a. Applicability of the Educational Expense Deduction to a Veteran or Surviving Spouse Payee The educational expense deduction applies _only_ in current-law pension cases.Per [38 CFR 3.272(i)](), a Veteran’s or surviving spouse’s income for VA purposes may be reduced by amounts paid for tuition, fees, books, and necessary materials.If the Veteran or surviving spouse is found to be in need of regular A&A, an additional deduction is allowed for transportation expenses which * are related to school attendance, and * exceed the reasonable amounts that would have been incurred by a nondisabled person. ### IX.i.3.D.4.b. Developing for Educational Expenses for a Veteran or Surviving Spouse Payee The educational expense deduction is allowed after the fact.Send the claimant _[VA Form 21P-8049](), _if follow-up development is needed. ### IX.i.3.D.4.c. Applicability of the Educational Expense Deduction to Children The educational expense deduction for children applies _only_ in current-law pension cases. Per [38 CFR 3.272(j)(2)](), the educational expense deduction applies * to cases in which the child is * the payee, and * a dependent on a Veteran’s or surviving spouse’s claim * _only_ to reduce the child’s earned income and does _not_ apply if the child has only unearned income, and * _only_ if the child is pursuing a course of post-secondary (after high school) education or training. **Note:** Deductible expenses include amounts paid for tuition, fees, books, and materials. ### IX.i.3.D.4.d. Developing for a Child’s Educational Expenses Use a [_VA Form 21-10210, Lay/Witness Statement_](), to develop a child’s post-secondary educational expenses.Do _not_ develop for these expenses unless a child’s earned income exceeds the amount that can be deducted under [38 CFR 3.272(j)(1)](). **Reference:** For information on the current and historical exclusion amount from a child’s earnings for * Veterans Pension, see the [Veterans Pension rate tables](), and * Survivors Pension, see the [Survivors Pension rate tables]().