Tax Court Addresses Minister Car Expenses
Ruling illustrates importance of maintaining proper records.

The Tax Court ruled that a minister could not use the "actual expense" method to compute his car expenses, since he failed to keep records to prove the percentage of total miles that he drove the car for personal reasons. Ministers, like any other taxpayer, can deduct the actual expenses they incur in using a car for business purposes. However, their business expense deduction must be reduced by a "personal use percentage". This refers to the percentage of total miles that the car is used for personal reasons. The idea is this—expenses incurred in operating a car are deductible as a business expense only to the extent the car is used for business purposes. There is no deduction for expenses allocated to the personal use of a car. Since the minister could not establish the number of miles he drove the car for personal reasons, the personal use percentage could not be computed. This meant that the "actual expense" method could not be used to calculate the deduction for the business use of the car. The court permitted the minister to use the standard mileage rate to compute a deduction for the business use of the car. The court multiplied the standard mileage rate for the year in question times the number of miles the car was driven for business purposes.

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Posted: April 1, 1996

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