IRS Allowable Expense Standards
The IRS does not let you use your actual expenses to calculate what you can afford to pay. It uses standardized allowances instead. Enter your household details below to see exactly what the IRS will allow for your situation.
Why this matters:Your IRS allowable expenses determine your Monthly Disposable Income (MDI). MDI is the number that drives everything — your minimum Offer in Compromise amount (MDI × 12 or × 24), your installment agreement payment, and whether you qualify for Currently Not Collectible status. The higher your allowed expenses, the lower your MDI, and the better your options.
Your Household
Higher healthcare allowance for members 65 and over
Housing data available for CA, NY, TX, FL. Transportation varies by region for all states.
IRS allows a maximum of 2 vehicles
Your 2026 IRS Allowable Expenses
Source: IRS Collection Financial Standards, effective April 2026 (IRM 5.15.1)
National Standards — Food, Clothing & Other Items
IRM 5.15.1.5 — same in all 50 states
Household of 1 person
Covers food, clothing, housekeeping supplies, personal care, and miscellaneous
$839/mo
1 person
$839
2 persons
$1,481
3 persons
$1,753
4 persons
$2,129
Out-of-Pocket Healthcare
IRM 5.15.1.6 — does not include insurance premiums
1 person under 65 × $84 = $84/mo
$84/mo
Health insurance premiums are allowed separately at your actual documented cost.
Transportation
IRM 5.15.1.7 — select a state to calculate
Select a state above to see your transportation allowance.
Housing & Utilities (Local Standards)
IRM 5.15.1.8 — varies by state and county
Select your state and county above to see your housing and utilities allowance.
What to do with these numbers
- 1Subtract your total allowable expenses from your gross monthly income. The result is your Monthly Disposable Income (MDI).
- 2If MDI × 12 is less than your total tax debt, you may qualify for an Offer in Compromise.
- 3If MDI is near zero, you may qualify for Currently Not Collectible status — the IRS pauses collection.
- 4Your MDI is also your minimum installment agreement payment under a Partial Pay IA.
Why the IRS Uses Standardized Expenses
When the IRS evaluates how much you can afford to pay, it does not accept your actual monthly budget at face value. Instead, it applies a set of fixed allowances called the Collection Financial Standards. These were originally created to create a consistent, nationwide baseline — so that a taxpayer in rural Mississippi and one in Manhattan are evaluated using the same type of framework, adjusted for where they live.
The IRS updates these standards annually, usually in March or April. The 2026 update took effect in April 2026 and is what all IRS revenue officers, offer examiners, and automated systems use right now.
National Standards vs. Local Standards — What is the difference?
National Standards
- Same dollar amounts in every state
- Cover: food, clothing, housekeeping supplies, personal care products, miscellaneous
- IRS will not allow more than the national standard, even if you spend more
- 2026: $839/mo for 1 person, up to $2,129/mo for 4 people
Local Standards
- Vary by state and county
- Cover: housing & utilities, transportation
- Housing: IRS allows actual expenses if they are at or below the local standard. Above the standard, you need to document and justify.
- Transportation: operating costs vary by Census region; ownership costs are the same nationwide
Expenses the IRS allows at actual cost, on top of the standards
These are not capped by the standards — you document your actual monthly amount:
Next Steps
OIC Eligibility Calculator
Use your expense allowances to calculate your Reasonable Collection Potential and minimum offer amount.
Offer in Compromise Guide
Full explanation of how MDI and RCP are used to evaluate your OIC application.
Installment Agreements
How your MDI determines your minimum required payment under a Partial Pay agreement.
Currently Not Collectible
If your allowable expenses exceed your income, you may qualify to pause all IRS collection.