When you owe the IRS and can't pay in full, the IRS decides what you can afford — and it does not use your real budget to do it. It uses a fixed set of allowable living expenses called the Collection Financial Standards. Whatever you earn above those allowances is treated as money available to pay the IRS.
That gap surprises many taxpayers. A family can be current on every bill, living modestly by local standards, and still be told it has hundreds of dollars a month "available" for the IRS. This post explains how the standards work, shows the actual figures for Lafayette, Louisiana, and explains why the IRS is not required to allow your full mortgage, private school tuition, or other expenses above the caps.
The Collection Financial Standards are the IRS's yardstick for "reasonable" living expenses. The current figures took effect on June 29, 2026, and apply to any financial analysis done on or after that date.
The IRS uses them whenever it reviews a Collection Information Statement (Form 433-A or 433-F). That includes non-streamlined installment agreements, offers in compromise, and requests for Currently Not Collectible status. Monthly income minus allowable expenses equals the amount the IRS expects you to pay each month.
The standards fall into three groups. The National Standards cover food, housekeeping supplies, apparel, personal care, and miscellaneous expenses; they are the same everywhere in the country, and you receive the full amount for your household size without proving what you spend. The out-of-pocket health care standard is a flat monthly amount per person, also allowed without proof, on top of what you pay for health insurance. The Local Standards cover housing and utilities, set by county (or parish, in Louisiana), and transportation, set by Census region or major metro area. Local Standards work as caps: you receive the lesser of what you actually spend or the standard.
Other items — current income taxes, health insurance, court-ordered payments, child care needed to work — are allowed separately if they meet the IRS's "necessary expense" test.
A Lafayette family of four is capped at $2,355 a month for housing and utilities — rent or mortgage, property taxes, insurance, and every utility bill combined. The figures below are the monthly allowances that apply to Lafayette Parish residents as of June 29, 2026.
Housing and utilities. The Lafayette Parish cap is $1,706 for a household of one, $2,004 for two, $2,112 for three, $2,355 for four, and $2,393 for five or more. That single figure must cover mortgage principal and interest or rent, property taxes, homeowner's or renter's insurance, HOA fees, electricity, gas, water, trash, phone, cable, and internet.
Food, clothing, and other items. The National Standards total $867 a month for one person, $1,558 for two, $1,857 for three, and $2,176 for four, plus $397 for each additional person. For a family of four, that breaks down to $1,278 for food, $95 for housekeeping supplies, $249 for apparel, $118 for personal care, and $436 for miscellaneous expenses.
Transportation. Lafayette is not one of the IRS's named metro areas, so the South regional figures apply. The ownership allowance is up to $703 a month for one vehicle and $1,406 for two, but only if you actually have a loan or lease payment; a paid-off car gets $0. Operating costs — gas, maintenance, insurance, and registration — are capped at $291 for one vehicle and $582 for two. A household with no vehicle receives $220 a month for public transportation.
Out-of-pocket health care. The IRS allows $90 per person under 65 and $163 per person 65 or older each month, without proof of what you spend. Health insurance premiums are allowed separately at actual cost.
The key point: the IRS can ignore real expenses that exceed the standards. A higher bill does not mean a higher allowance. The Internal Revenue Manual says the taxpayer is allowed the standard amount for housing and utilities or the amount actually claimed and verified, whichever is less.
Mortgage payments are the most common example. If a Lafayette family of four spends $3,600 a month on its mortgage, insurance, and utilities, the IRS allows $2,355. The remaining $1,245 is treated as money available to pay the IRS — even though the bank still expects the full payment every month.
Private school tuition is generally not allowed at all. Education expenses count only for a physically or mentally challenged child when no public school offers similar services, or when the education is a condition of the taxpayer's employment. Ordinary private or parochial school tuition, however important to the family, does not qualify.
The same logic reaches other expenses. A $900 truck note is allowed at $703, and a paid-off vehicle receives no ownership allowance. Credit card and other unsecured debt payments are generally disallowed, because the IRS views itself as ahead of unsecured creditors. Charitable giving and tithing are allowed only if they are a condition of employment or meet the necessary expense test. Support for adult children, extra vehicles, boats, and second homes rarely survive the review.
The IRS sorts expenses into two buckets. Necessary expenses provide for the health and welfare of the family or the production of income. Conditional expenses don't meet that test and are generally disallowed, with limited exceptions.
There are two main exceptions, both found in the Internal Revenue Manual - Section 5.14.1.4.1. Under the six-year rule, if the full balance, including penalties and interest, can be paid within six years and before the collection statute expires, the IRS may allow living expenses above the standards, along with payments such as credit card minimums and student loans. Under the one-year rule, a taxpayer who cannot pay within six years may be given up to one year to modify or eliminate excessive necessary expenses — for example, to sell or refinance a house or trade in an expensive vehicle.
You can also ask for a deviation from the standards with documentation showing the standard is inadequate for your basic living expenses, such as a medical condition or a disabled family member. The miscellaneous category does not allow deviations.
Consider a hypothetical Lafayette couple, both under 65, with two children. They earn $12,500 a month in gross income, pay $2,300 a month in current taxes, and pay $650 a month for health insurance. The IRS allows the taxes and insurance at actual cost.
Their real monthly budget looks like this. They spend $3,600 on their mortgage, insurance, and utilities; $2,600 on food, clothing, and household items; $200 on out-of-pocket medical costs; $1,500 on two car notes ($900 and $600); $500 on gas and car insurance; $1,400 on private school tuition; and $400 on credit card minimums. Add taxes and insurance, and their actual expenses total $13,150 — $650 more than they earn each month.
The IRS sees it differently. Housing is cut to the $2,355 parish cap. Living expenses are set at the $2,176 National Standard. Health care is allowed at the $360 standard ($90 for each of four people), which is more than they spend. The $900 car note is reduced to the $703 cap, while the $600 note is allowed in full, for $1,303 total. Operating costs are allowed at the actual $500. Private school tuition and credit card payments are allowed at zero.
The IRS's total allowable expenses come to $9,644. Subtracting that from $12,500 leaves $2,856 a month that the IRS considers available to pay the tax debt. The family that feels $650 short every month is, in the IRS's view, able to pay nearly $2,900. Unless the balance qualifies for the six-year rule or a recognized exception, the family will need to cut expenses, sell assets, or look at other resolution options.
The standards are a starting point, not the final word. Taxpayers who document their circumstances — a medical condition, a disabled family member, special education needs, or job-required expenses — can ask the IRS to deviate from the standards. The timing and structure of a resolution also matter, since the six-year rule and one-year rule can change which expenses the IRS will accept.
Before you submit a Form 433-A or 433-F, it pays to know how the IRS will read it. A financial statement that lists every real expense, without regard to the standards, can lead to a payment demand the household cannot sustain. If you owe the IRS, hire Bryson Law Firm, LLC so that we can review your finances against the current standards and help you choose the right path, whether that is an installment agreement, an offer in compromise, or Currently Not Collectible status.
