National Standards: Food, Clothing and Other Items
National Standards have been established for five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.
The standards are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES). The survey collects information from the Nation's households and families on their buying habits (expenditures), income and household characteristics.
National Standards: Out-of-Pocket Health Care Expenses
Out-of-Pocket Health Care standards have been established for out-of-pocket health care expenses including medical services, prescription drugs, and medical supplies (e.g. eyeglasses, contact lenses, etc.).
The table for health care allowances is based on Medical Expenditure Panel Survey data and uses an average amount per person for taxpayers and their dependents under 65 and those individuals that are 65 and older.
The out-of-pocket health care standard amount is allowed in addition to the amount taxpayers pay for health insurance.
Local Standards: Housing and Utilities
The housing and utilities standards are derived from Census and BLS data, and are provided by state down to the county level. The standard for a particular county and family size includes both housing and utilities allowed for a taxpayer’s primary place of residence.
Housing and Utilities standards include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, telephone and cell phone. The tables include five categories for one, two, three, four, and five or more persons in a household.
Local Standards: Transportation
The transportation standards for taxpayers with a vehicle consist of two parts: nationwide figures for monthly loan or lease payments referred to as ownership costs, and additional amounts for monthly operating costs broken down by Census Region and Metropolitan Statistical Area (MSA). A conversion chart has been provided with the standards that lists the states that comprise each Census Region, as well as the counties and cities included in each MSA. The ownership cost portion of the transportation standard, although it applies nationwide, is still considered part of the Local Standards.
The ownership costs provide maximum allowances for the lease or purchase of up to two automobiles if allowed as a necessary expense. A single taxpayer is normally allowed one automobile.
The operating costs include maintenance, repairs, insurance, fuel, registrations, licenses, inspections, parking and tolls.
If a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense. If a taxpayer has a car, but no car payment, only the operating costs portion of the transportation standard is used to figure the allowable transportation expense. In both of these cases, the taxpayer is allowed the amount actually spent, or the standard, whichever is less.
There is a single nationwide allowance for public transportation based on BLS expenditure data for mass transit fares for a train, bus, taxi, ferry, etc. Taxpayers with no vehicle are allowed the standard, per household, without questioning the amount actually spent.
If a taxpayer owns a vehicle and uses public transportation, expenses may be allowed for both, provided they are needed for the health, and welfare of the taxpayer or family, or for the production of income. However, the expenses allowed would be actual expenses incurred for ownership costs, operating costs and public transportation, or the standard amounts, whichever is less.
The Collection Financial Standards were revised on 10/01/2007 to:
- Eliminate income ranges for National Standard Expenses
- Eliminate separate tables for Alaska and Hawaii, creating one set of tables for National Standard Expenses
- Create a new National Standards category for Health Care
- Expand the number of household categories for Housing & Utility Expenses
- Include an allowance for cell phone costs in the Housing & Utility Expenses
- Create equal allowances for first and second vehicles under Transportation Expenses
- Create a separate nationwide Public Transportation allowance
- Metropolitan Statistical Areas (MSAs) for Milwaukee, Cincinnati, Kansas City and Tampa were not included in the BLS CES statistics used for 2007 transportation operating expenses. Taxpayers residing in the counties previously covered by these MSAs will now use the applicable regional numbers.
The Collection Financial Standards were revised March 1, 2008 and include the following change:
Metropolitan Statistical Areas (MSAs) for Pittsburgh, St. Louis, Anchorage, Denver, Honolulu and Portland were not included in the BLS CES statistics used for 2008 transportation operating expenses. Taxpayers residing in the counties previously covered by these MSAs will now use the applicable regional numbers.
The revised standards are effective for financial analysis conducted on or after March 1, 2008.