BIR Ruling

July 5, 1968 Action Line c/o The Manila Times P. O. Box 775 Manila S i r : This refers to the letter dated March 19, 1968 of Mrs. Delia Rosal, Kamuning Road, Quezon City, requesting information as to the allowable deductions which a taxpayer may claim in lieu of the 10% optional standard deduction and as to whether or not driver's salary is deductible. In reply, I have the honor to inform you that a taxpayer may deduct from his gross income the itemized deductions mentioned in Section 30 of the Tax Code, to wit: (a) expenses in general (f) depletion (b) interest (g) depreciation (c) taxes (h) charitable contribution (d) losses (i) pension trust contribution (e) bad debts In lieu of the aforementioned deductions, an individual other than a nonresident alien may claim the optional standard deduction which is equivalent to 10% of his gross income but not to exceed P1,000.00. A taxpayer must signify in his return his intention to elect the optional standard deduction; otherwise, he shall be deemed to have elected the itemized deduction. After the taxpayer has elected one method, such election is irrevocable for that taxable year. In other words, he is not allowed to shift from one method to another during that year. As regards expenses, they are deductible if (1) they are ordinary and necessary; (2) they are paid or incurred within the taxable year; and, (3) they are paid or incurred in carrying on a trade or business. Thus, expenses in operating one's car used exclusively in making business calls, including chauffeur's wages, gasoline, repairs and depreciation are deductible from his gross income. However, if the same is also used for personal or family convenience, only that portion of the expenses attributable to the business may be deducted. It may further be stated that in order that deductions claimed may be allowed by this Office, it is necessary for the taxpayer to support said expenses with receipts or other evidences. xelbil Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue