IRS Collection Financial Standards: the allowable living expenses effective June 29, 2026

How the standards work

The IRS describes the standards as the measure of expenses that meet the necessary expense test: those “necessary to provide for a taxpayer's (and his or her family's) health and welfare and/or production of income.” The current tables took effect on June 29, 2026; the IRS page says “The revised standards are effective for financial analysis conducted on or after June 29, 2026.” Starting in 2024, the IRS inflates the standards with the Personal Consumption Expenditures index rather than CPI.

IRM 5.15.1.8 sorts expenses into three groups: allowable living expenses (the national and local standards), other necessary expenses, and other conditional expenses. Two application rules matter most:

Household size generally equals the taxpayer plus the dependents on the most recent return. A deviation above a standard is allowed when the standard is inadequate for basic living expenses, but the taxpayer must provide reasonable substantiation (IRM 5.15.1.2, 5.15.1.8). The standards do not apply to businesses: “The ALE standards are not applicable to corporations, partnerships, LLCs, or for any business expenses.” Taxpayers living abroad are measured with the International Collection Financial Standards Calculator, not a U.S. location.

The IRS disclaimer also matters: these standards are for federal tax collection only. Bankruptcy means testing uses figures published by the U.S. Trustee Program.

National standards: food, clothing and other items

Effective June 29, 2026 (IRS national standards page):

For households larger than four, add $397 per additional person to the four-person total. The miscellaneous allowance covers expenses not included elsewhere (the IRS lists credit card payments, bank fees, reading material and school supplies) and any part of other expenses above the standards that is not allowed as a deviation. IRM 5.15.1.9: “Deviations from the standard amount are not allowed for miscellaneous expenses.” A taxpayer claiming more in one category, such as food for a prescribed diet, substantiates only that category.

Out-of-pocket health care

The amount is allowed per person without questioning actual spending, and in addition to health insurance premiums. Elective procedures such as cosmetic surgery or elective dental work are generally not allowed. Higher amounts require documentation; IRM 5.15.1.9 notes this often arises for taxpayers without insurance.

Housing and utilities

Housing and utilities standards are set by county and household size (one to five or more), from Census and BLS data, and published by state; the IRS notes the full table runs 125 printed pages. The standard covers rent or mortgage (including interest), property taxes, insurance, maintenance and repairs, and utilities including telephone, cell phone, cable and internet.

Taxpayers get the lesser of the standard or the verified actual amount. The standard applies to the primary residence only. When deciding whether a deviation is appropriate, IRM 5.15.1.10.1 tells employees to weigh the cost of moving, the added commuting cost from cheaper housing, and lost Schedule A deductions. But IRM 5.15.1.8 also says: “A deviation from the local standard is not allowed merely because it is inconvenient for the taxpayer to dispose of valued assets or reduce excessive necessary expenses.”

Transportation

Ownership costs (loan or lease payments) are national; operating costs are regional with higher amounts in listed metropolitan areas. Effective June 29, 2026:

The full MSA list and county definitions are on the IRS transportation standards page. The rules: a taxpayer with no car payment gets $0 for ownership and only the operating allowance; a single taxpayer is normally allowed one vehicle; each vehicle is allowed the lesser of actual cost or the standard, computed separately; a taxpayer with no vehicle gets the public transportation amount without proof. IRM 5.15.1.10.2 notes “Vehicle operating standards are not based on average commuting distances”, and a long commute can justify higher operating costs if substantiated.

Other necessary and conditional expenses

IRM 5.15.1.11 lists other expenses that are normally allowed if they meet the necessary expense test. A selection:

On credit cards, IRM 5.15.1.11 adds: “Generally, minimum payments on credit cards are allowed under the six-year rule.” Form 433-A lists private school tuition, college expenses, charitable contributions, voluntary retirement contributions and unsecured debt payments as expenses not generally allowed unless proven necessary.

A worked example with the 2026 amounts

Take a married couple with no dependents in Harris County, Texas (inside the Houston MSA), both under 65, with one financed car costing $780 a month and actual vehicle operating costs of $300. Using the amounts effective June 29, 2026:

The $77 of car payment over the ownership standard is disallowed unless substantiated as necessary, but the couple can apply part of the miscellaneous allowance inside the $1,558 national standard to it, since that allowance covers expenses above the standards not allowed under a deviation. If the liability, with accruals, can be paid within six years and the CSED, the six-year rule would allow the full $780 if reasonable.

The six-year and one-year rules

The IRS page summarizes the six-year rule: it “allows for payment of living expenses that exceed the collection financial standards, and allows for other expenses, such as minimum payments on student loans or credit cards, as long as the tax liability, including penalty and interest, can be full paid in six years.” Financial information is required but substantiation of reasonable expenses is not. IRM 5.14.1.4.1 adds the limit: “Do not automatically allow agreements based on the six year maximum if expenses are unreasonable.” The payment must also full pay within the CSED.

Under the one-year rule, a taxpayer who cannot pay within six years may get up to one year to reduce or eliminate excessive expenses. Neither rule applies to corporations, partnerships, liable LLCs, business expenses, or BMF liabilities of in-business sole proprietors. For partial payment agreements, conditional expenses that are not necessary are not allowed at all.

Many installment agreements never reach this analysis. The IRS page notes “The vast majority of installment agreements secured by Collection employees are simple payment plans, which require no financial analysis and no substantiation of expenses.” See simple payment plans.

Questions practitioners ask