You can deduct housing costs, transportation, food, healthcare, childcare, taxes, mandatory retirement contributions, secured debt payments (mortgage, car loans), child support, alimony, and education expenses for dependent children. The means test uses IRS National and Local Standards for most expense categories.
The expense deductions on the means test are what make it possible for many above-median-income filers to still qualify for Chapter 7.
IRS Standard Expenses
The means test uses IRS-published standards for basic living expenses, which vary by location and household size:
- National Standards: Food, clothing, personal care, entertainment, and miscellaneous expenses. These are fixed amounts based on household size.
- Local Standards -- Housing: Based on your county. Covers mortgage/rent, property tax, insurance, maintenance, and utilities.
- Local Standards -- Transportation: Ownership costs (car payment) and operating costs (gas, insurance, maintenance), based on your region. One amount if you have a car, a different amount for public transit only.
Actual Expense Deductions
Beyond the IRS standards, you can deduct your actual amounts for:
- Health insurance premiums for entire household
- Out-of-pocket healthcare costs exceeding the IRS standard
- Childcare and dependent care
- Court-ordered payments (child support, alimony)
- Education expenses for dependent children (up to $1,875/year per child)
- Involuntary payroll deductions (taxes, Social Security, Medicare, union dues)
- Term life insurance premiums
- Telecommunications (phone, internet -- a set amount)
Secured Debt Payments
One of the most powerful deductions is secured debt payments. Your monthly mortgage payment and car loan payments are fully deductible. For many above-median filers, these deductions are what push their disposable income below the threshold.