The Out-of-Pocket Health Care Standard and Medical Costs

Illness is one of the fastest ways to slide from "struggling" to "cannot pay the IRS at all." A diagnosis brings bills, and it often takes away income at the same time. The IRS financial analysis has a specific place for those costs. It is more flexible than most people expect, but you have to use it correctly.

Two separate medical lines

Form 433-A (Rev. 6-2026) has two medical expense lines. Line 41 is health insurance. Line 42 is out-of-pocket health care costs. Form 433-F puts both in box 4 of Section H, "Medical." They are treated differently.

IRM 5.15.1.9 is explicit: "The out-of-pocket health care standard amount is allowed in addition to the amount taxpayers pay for health insurance." Your premiums do not eat into the standard. You get both.

The 2026 figures

Under the Collection Financial Standards effective June 29, 2026, the out-of-pocket health care standard is:

The standard is per person, so it scales with the household. A couple both 65 or older is allowed $326 a month. A family of four, all under 65, is allowed $360. That is why Form 433-F asks how many people in the household are under 65 and how many are 65 and over.

What it covers

IRM 5.15.1.9 lists three things: medical services, prescription drugs, and medical supplies such as eyeglasses and contact lenses. The Form 433-F instructions add dental expenses. The Form 433-A instructions mention hearing aids among medical supplies.

What it does not cover: "Medical procedures of a purely cosmetic nature, such as plastic surgery or elective dental work are generally not allowed."

Allowed without questioning

Like the food and clothing standard, the health care standard is allowed in full. IRM 5.15.1.9 says taxpayers and their dependents are allowed the standard amount monthly per person "without questioning the amounts they actually spend," and verification is "not required unless the amount claimed exceeds the standard."

A healthy 40-year-old who spent nothing on doctors last year still gets $90 a month.

When your costs are higher

This is where hardship cases are made. IRM 5.15.1.9 says taxpayers who claim more than the standard "may be allowed more than the standard if they provide documentation to substantiate and justify the additional expenses." It notes this often comes up with taxpayers who have no health insurance.

Real medical costs can dwarf the standard. Insulin, specialty drugs, dialysis transportation, physical therapy copays, durable medical equipment, and home health aides can easily run hundreds or thousands of dollars a month. Every dollar of documented, necessary cost above the standard reduces the income the IRS says you have left to pay with.

The Treasury regulation backs this up. Regulation 301.6343-1(b)(4)(ii) lists "medical expenses (including health insurance)" among the costs the IRS must consider, and lists "a medical catastrophe" as an extraordinary circumstance. You are not asking for a favor. You are pointing to the rule.

How to document medical costs

All deviations "must be verified, reasonable and documented in the case history," according to IRM 5.15.1.9. What works in practice:

• Pharmacy printouts showing twelve months of prescriptions and your share of the cost.
• Explanation of benefits statements showing patient responsibility.
• Recurring bills from providers, therapy clinics, or equipment suppliers.
• A short physician letter confirming the condition and the ongoing treatment plan.
• Payment plans with hospitals, with proof you are making the payments.

Medical costs often come in uneven lumps. IRM 5.15.1.3 tells employees to average necessary living expense items with varying monthly payments over 12 months, and IRM 5.15.1.8 allows a review of up to a year of expenses when three months is not representative. A year of medical history gives a fairer monthly number than one quiet quarter.

Terminal illness and the shortcut

For some taxpayers, medical facts can eliminate the financial statement entirely. Both IRM 5.16.1.2.9 and the campus procedures in IRM 5.19.17.2.4.1 allow an account to be reported CNC without a collection information statement when the aggregate balance is under a threshold and the taxpayer "has a terminal illness or excessive medical bills." The IRM redacts the exact balance threshold. Employees are still required to confirm the circumstances, through internal records or documentation from the taxpayer. See CNC exception processing.

Health insurance premiums

Health insurance is a separate line, allowed at the amount actually paid when it is necessary. If premiums come out of your paycheck, they still count; just make sure they are not also hidden inside a net pay number. Report gross wages and list the premium separately.

If a non-liable spouse pays the family premium, the shared expense rules in IRM 5.15.1.5 apply, and the liable taxpayer is allowed a percentage share. The IRM's own example allocates a $400 family premium paid by the non-liable spouse at the liable spouse's 20 percent income share, or $80.

Disability and lost income

Medical problems rarely stop at expenses. They reduce income. Form 433-A line 7 asks whether you anticipate an increase or decrease in income. If you are on medical leave, waiting on a disability decision, or cutting hours because of treatment, say so and attach proof. The regulation tells the IRS to consider "ability to earn" and "employment status and history." A doctor's restriction letter speaks to both.

Caregiving costs for a sick family member

Sometimes the patient is not you. It is a parent, a spouse, or a disabled adult child. Those costs belong on the financial statement too, but they usually do not fit the out-of-pocket line. IRM 5.15.1.11 treats dependent care "for care of the elderly, handicapped, or otherwise disabled" as an allowable expense "if there is no alternative to the taxpayer paying the expense."

The key phrase is "no alternative." Show why Medicaid, insurance, or another family member is not covering the cost, and document what you actually pay. Adult day care invoices, home aide timesheets, and pharmacy bills in the dependent's name all help.

Medical debt you are already paying

Old hospital bills are another question. Payments on unsecured debts are generally not allowed under IRM 5.15.1.11 unless they meet the necessary expense test. A payment plan for past medical care is not automatically allowed just because it is medical.

The argument that sometimes works is continuity of care. If the provider will stop treating you unless the balance is paid down, the payment protects ongoing necessary treatment. Get that in writing from the provider. Without it, expect the IRS to point you to the miscellaneous allowance in the National Standards.

Timing your request around treatment

Medical costs often peak early in treatment and then level off, or rise steadily as a condition progresses. Present the realistic picture, not the worst single month. A request supported by a year of history and a doctor's prognosis is far more durable than one built on a single bad quarter, because hardship CNC accounts are monitored and can be reactivated when income rises.

The bottom line

The out-of-pocket standard is small. $90 a month does not cover much. But it is a floor, not a ceiling, and the IRM gives you a path above it. Document your real medical costs carefully, and they will carry more weight in your hardship case than almost anything else you can put in front of a collection employee.