• Fair Housing for Disabled Veterans Act would exclude VA disability payments from income calculations for affordable housing programs
• Current IRS code counts disability compensation as income, often pushing disabled veterans above eligibility thresholds for housing assistance
• Legislation introduced by Reps. Linda Sánchez, Mike Kelly, Jimmy Gomez and Blake Moore targets flaw affecting most vulnerable veterans

WASHINGTON (TDR) — A bipartisan group of lawmakers introduced legislation Thursday designed to remove a critical barrier preventing disabled veterans from accessing affordable housing programs. The Fair Housing for Disabled Veterans Act would amend the Internal Revenue Code to exclude service-connected disability benefits and pensions from income calculations used to determine eligibility for housing assistance, potentially helping thousands of wounded warriors secure stable housing.

IRS code creates unintended consequences

Under current law, VA disability compensation and pension payments are counted as income when determining eligibility for programs financed by the Low Income Housing Tax Credit and qualified residential bonds. This often pushes disabled veterans above income thresholds, disqualifying them from critical housing assistance despite their service-connected injuries.

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“Veterans who have sacrificed for our country shouldn’t face barriers when trying to find a safe, affordable place to live,” said Rep. Linda Sánchez of California, one of the bill’s sponsors. “Disability benefits are meant to cover the costs of injuries sustained during their service – they’re not income.”

The legislation has drawn support from Rep. Mike Kelly of Pennsylvania, chairman of the Ways and Means Subcommittee on Tax, along with Democratic Reps. Jimmy Gomez and Republican Rep. Blake Moore of Utah.

Wounded warriors penalized for service injuries

Jose Ramos, vice president for government and community relations for Wounded Warrior Project, emphasized the urgency of the issue. “VA disability compensation should never be a barrier to accessing stable housing for veterans,” Ramos said. “But currently, wounded warriors are penalized for injuries sustained during service to our country when their VA benefits make them ineligible to rent affordable, stable, and often higher-quality housing.”

“Our veterans are being denied access to affordable housing programs because of a flaw in IRS code that classifies their disability benefits as income,” said Rep. Gomez.

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The more severe a veteran’s disability, the higher their compensation payments – and paradoxically, the less likely they are to qualify for housing assistance under current rules. This creates a cruel irony where the most vulnerable veterans face the greatest barriers to securing stable housing.

Addressing veteran homelessness crisis

The legislation comes as veteran homelessness remains a persistent challenge despite recent progress. According to the 2024 Point-in-Time Count, 32,882 veterans experienced homelessness in January 2024, representing a 7.5% decrease from 2023 but still highlighting the ongoing need for comprehensive solutions.

Between 2010 and 2024, veteran homelessness decreased 55.6% due to targeted investments in affordable housing and wraparound services. However, rising living costs, limited affordable housing availability, and the current income calculation flaw continue to push vulnerable veterans toward housing instability.

Clarifying the bill’s scope

The Fair Housing for Disabled Veterans Act specifically affects affordable housing program eligibility and does not make VA disability compensation taxable. The legislation also does not change how disability payments are treated for VA home loan purposes, where lenders will continue counting them as income for mortgage qualification.

Rep. Moore, who represents Hill Air Force Base and an active veteran community, stated: “Homelessness among our veteran population is unacceptable, and our veterans are more than deserving of affordable housing – especially when they are injured while serving.”

The bill amends the Internal Revenue Code to disregard payments of disability compensation or pension under chapters 11 and 15 of title 38, United States Code, when determining income for LIHTC and qualified residential rental project bonds. The changes would apply to determinations made after the bill’s enactment.

Should disability benefits earned through military service be excluded from income calculations for all federal assistance programs?

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