Housing costs are based on the Department of Housing and Urban Development’s fair market rents, which represent rents (shelter rent plus utilities) at the 40th percentile for privately owned, structurally safe, and sanitary rental housing of a modest nature with suitable amenities. Studio apartments were used for one-person families, one-bedroom apartments for two-adult families, two-bedroom apartments for families with one or two children, and three-bedroom apartments for families with three or four children.

Food costs are based on the “low-cost plan” taken from the Department of Agriculture report Official USDA Food Plans: Cost of Food at Home at Four Levels. This plan is the second-least-expensive of four types of food plans and assumes almost all food is bought at the grocery store and then prepared at home. The USDA food plans represent the amount families need to spend to achieve nutritionally adequate diets.

Child care expenses are based on costs of center-based child care and family-based care for four-year-olds and school-age children, as reported by the Child Care Aware of America annual report on the cost of child care by state. We assume all families in urban areas utilize center-based care and all families in rural areas utilize family-based care. In one-child families, we assume the child is 4 years old. In families with more than one child, we assume the additional children are ages 8, 12, and 16, respectively.

Transportation expenses are based on the costs of owning and operating a car for work and other necessary trips. The National Household Travel Survey is used to derive costs based on average miles driven per month by size of the metropolitan statistical area or rural area and multiplied by the cost per mile, as provided by the Internal Revenue Service.

Health care expenses include insurance premiums and out-of-pocket expenditures. Premiums are based on the lowest-cost bronze plan in the rating area, adjusted for family size, age of user (adults are assumed to be 40), and tobacco surcharge (assumed non-smokers). Out-of-pocket medical expenditures are calculated using the Medical Expenditure Panel Survey by region and are differentiated between metropolitan statistical areas and non–metropolitan statistical areas for those covered by private insurance.

Other necessities include apparel, entertainment, personal care expenses, household supplies (including furnishings and equipment, household operations, housekeeping supplies, and telephone services), reading materials, school supplies, and other miscellaneous items of necessity as reported for the second quintile from the Bureau of Labor Statistics Consumer Expenditure Survey.

Taxes are calculated from the National Bureau of Economic Research’s Internet TAXSIM, which calculates information on federal personal income taxes, state income taxes, and federal Social Security and Medicare payroll taxes.