IRS Allowable Living Expenses 2026: National & Local Standards Tables

IRS Allowable Living Expenses, known as ALE or Collection Financial Standards, are the published expense allowances the IRS treats as necessary for a taxpayer's basic living needs when evaluating ability to pay. ALE is set by IRM 5.15.1 and updated annually by the IRS National Office. The standards are used in every collection alternative analysis: Currently Not Collectible (CNC) status under IRM 5.16.1.2.9, installment agreements under IRC Section 6159, Offer in Compromise calculations under IRC Section 7122, and Reasonable Collection Potential (RCP) determinations. ALE has four categories: National Standards, Local Standards, Out-of-Pocket Health Care, and Other Necessary Expenses. The IRS subtracts allowable expenses from gross monthly income to calculate disposable income — the dollar amount it expects the taxpayer to pay each month toward the tax debt. FreeTaxUpdate.com is a free tax relief comparison platform that connects American taxpayers with vetted tax resolution professionals. Updated for 2026, the IRS standards reflect annual cost-of-living adjustments published in March 2026. Below is a complete reference to each category and the 2026 dollar amounts revenue officers and ACS agents apply when running the disposable income calculation. The Currently Not Collectible guide covers how this calculation determines hardship eligibility, and the offer in compromise guide covers how it feeds the RCP formula.

National Standards cover five expense categories combined into a single per-household-size allowance: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous. The IRS allows these amounts automatically without requiring receipts, lease agreements, or other documentation. A taxpayer claiming the National Standard at the published amount needs no supporting paperwork. A taxpayer claiming an amount above the National Standard must document health-and-welfare necessity under IRM 5.15.1.7 — and the IRS rarely approves above-standard amounts for the categories within National Standards. | Household Size | Monthly Amount | Annual Equivalent | | --- | --- | --- | | 1 person | $836 | $10,032 | | 2 persons | $1,478 | $17,736 | | 3 persons | $1,694 | $20,328 | | 4 persons | $2,054 | $24,648 | | 5+ persons | $2,054 + $389 each | Add $4,668 per add'l member | Breakdown of the $836 single-person standard: food $384, housekeeping supplies $45, apparel/services $90, personal care $42, miscellaneous $275. The miscellaneous category covers expenses not allocated elsewhere — credit card interest, bank fees, magazines, gifts, and similar items. Taxpayers do not itemize within the National Standard; the lump amount is taken at the published figure. In our experience helping clients, the most common National Standards mistake is taxpayers claiming far less than the standard because they think they spend less on food and clothing. The standard is automatic — claim it in full regardless of actual spending. For deeper context on how the standards interact with hardship analysis, see our Currently Not Collectible (CNC) guide.

Local Standards cover housing/utilities and transportation, with amounts that vary by location. Housing/utilities is set by county and includes mortgage or rent, property taxes, insurance, maintenance, dues, and all utilities (electric, gas, water, sewer, cable, internet, phone). Transportation has two components: ownership cost (the loan or lease payment, set nationally) and operating cost (gas, maintenance, registration, insurance, set by region). For 2026, housing/utilities ranges from approximately $1,400/month in lowest-cost rural counties to $3,500+/month in coastal high-cost MSAs. Selected 2026 examples for a one-person household: Los Angeles County, California $3,138; New York County, New York $3,418; Cook County, Illinois $1,891; Harris County, Texas $1,712; Wayne County, Michigan $1,520; Maricopa County, Arizona $1,798. The IRS publishes the full table at IRS.gov/businesses/small-businesses-self-employed/collection-financial-standards. The standard increases with household size — typically by 8–12% for each additional household member depending on county. | Vehicles | Ownership (national) | Operating (Northeast) | Operating (Midwest) | Operating (South) | Operating (West) | | --- | --- | --- | --- | --- | --- | | 1 vehicle | $617 | $325 | $292 | $307 | $345 | | 2 vehicles | $1,234 | $538 | $476 | $521 | $617 | Taxpayers without a vehicle are allowed a public transportation expense of $244 per month per household. Documentation required: lease agreement or mortgage statement and at least three months of utility bills for housing; auto loan statement, insurance policy, and registration for transportation. The IRS verifies amounts against documentation. A taxpayer with $4,200 actual housing cost in Los Angeles claims the $3,138 Local Standard as the allowed amount — the difference is borne by the taxpayer unless they can document health-and-welfare necessity for the higher amount under IRM 5.15.1.7. For step-by-step application of these numbers in a CNC request, see our blog post on Form 433-F line-by-line walkthrough.

Out-of-Pocket Health Care is a National Standard that allows $87 per month per person under age 65 and $158 per month per person age 65 and over for 2026. This covers copays, deductibles, prescription medications, and uncovered medical expenses — but does not cover health insurance premiums. Health insurance premiums (employer-provided, COBRA, ACA marketplace, Medicare supplement) are allowed in the actual amount paid, documented by premium statements or pay stub deductions. A 67-year-old taxpayer paying $185/month Medicare Part B premium plus $145/month Medigap premium claims the actual $330 in premiums plus the $158 Out-of-Pocket Health Care standard, totaling $488/month for medical. Other Necessary Expenses (ONE) under IRM 5.15.1.10 are case-specific items that meet two tests: they are necessary for the taxpayer's health and welfare or for the production of income, AND they are reasonable in amount. The most-claimed ONE categories are: court-ordered child support and alimony (full amount with court order); current-year federal tax payments (estimated tax payments to avoid future delinquency); required minimum life insurance with dependents (term coverage at reasonable cost, typically $50–$100/month); mandatory retirement contributions required by employment (401(k) match-required, public-employee pension contributions); required work expenses (uniforms, tools, union dues, required licenses); secured debt payments on assets the IRS treats as necessary (vehicle loans within the Local Standard, primary residence mortgage); and student loan minimum payments under income-driven repayment plans. Documentation is mandatory for every ONE item — court orders, payroll deduction reports, premium statements, employer requirements. In our experience, taxpayers leave $400–$1,200 per month of allowable expenses unclaimed because they do not realize Other Necessary Expenses applies to their situation. A child support order with $750/month payment is fully allowable but only if claimed and documented. A required $185/month uniform-and-tool deduction for a tradesperson is allowable but only if claimed. Each unclaimed dollar increases calculated disposable income by the same amount, often pushing the result from negative (CNC qualifying) to positive (installment agreement). For complete strategic context, our CNC guide walks through how the full ALE calculation interacts with the four resolution paths.

The disposable income calculation runs in five steps. First, total gross monthly income from all sources: wages (gross before withholding), self-employment net income (Schedule C net), Social Security, pension, rental net income, alimony received, and any other regular income. Second, subtract mandatory withholding: federal income tax, FICA, state income tax, Medicare. Third, subtract allowable expenses: National Standards (auto-allowed at the household-size amount), Local Standards (housing/utilities and transportation, capped at published amount), Out-of-Pocket Health Care (auto-allowed), health insurance premiums (actual), and Other Necessary Expenses (case-specific with documentation). Fourth, the result is monthly disposable income. Fifth, apply the rule for the resolution program being requested: zero or negative for CNC, any positive amount for an installment agreement, and disposable income × 12 (lump sum) or × 24 (periodic) for the future-income component of an OIC's RCP calculation. A worked example: married couple in Cook County, Illinois with two children (household of 4). Gross combined income $4,200/month after taxes. ALE calculation: National Standards $2,054 + Local Housing/Utilities $2,381 + Local Transportation (1 car) $617 + $292 = $909 + Out-of-Pocket Health Care 4 × $87 = $348 + actual health insurance premium $385 + court-ordered child support from prior marriage $480 = total ALE $6,557. Disposable income: $4,200 - $6,557 = negative $2,357/month. CNC qualifying. The same couple at $7,500/month income: $7,500 - $6,557 = $943/month disposable. Installment agreement at $943/month, or PPIA if balance cannot be paid within remaining CSED. **Common failure narrative:** taxpayers run the calculation themselves, leave out three or four allowable expenses they did not realize counted, and report a positive disposable income that disqualifies them from CNC. Always include the full National Standard regardless of perceived spending, the actual health insurance premium, all court-ordered payments, and any required work or retirement contributions. For situations where the math is close, professional representation through our tax relief reviews page or qualification check at our qualify page can capture the missed expenses. To estimate combined relief options including ALE-driven CNC, an installment agreement, and a potential OIC, use our tax savings calculator.