BIR Ruling

July 9, 1969 Mr. Ramon F. De Altonaga Davao City S i r : This refers to your letter dated March 21, 1968 requesting legal opinion on a query stated thus: "The corporation under which I am working pays me, aside of my regular salary, a monthly allowance of P500.00 for house, light, water and phone. cdll "In my income tax return for 1967, I will show said allowance of P6,000.00 a year as an additional income, but against it I will be showing in my deductible expenses the amounts paid for rent, light, water and phone during the year, duly supported by corresponding receipts. These expenses I estimate at around P420.00 per month against an income of P500.00 as above mentioned. "I have been informed that I will not be allowed to deduct the above mentioned expenses as they are considered personal in nature, but I deem this to be rather unequitable. Since I am to show as additional income the allowance which I receive for said expenses, it is but proper that the expenses for which the allowance was received, be also deducted from my gross income." In reply thereto, I have the honor to inform you that expenses of maintaining a household, including amounts paid for rent, water utilities, domestic service and the like are not deductible. A taxpayer who rents a property for residential purposes, but incidentally conducts business there (his place of business being elsewhere) shall not deduct any part of the rent. If however, he uses part of the house as his place of business, such portion of the rent and other similar expenses as is properly attributable to such place of business is deductible as a business expense (Par. 12, 663 P.H. Federal Taxes Vol. II). In computing net income no deduction is allowed in respect of personal, living, or family expenses under Section 31(a) of the Tax Code. Although the expenses incurred in the maintenance of the income earner is certainly incurred in the production of income, such expenses are not deductible because of the personal exemption allowances under Section 23 of the Tax Code. In view of the foregoing considerations, this Office is of the opinion and so holds that the expenses incurred by you for house rentals, light, water and phone for which a monthly allowance of P500.00 is paid to you by your employer corporation being personal in nature are not deductible for income tax purposes. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue