My church doesn’t reimburse me for use of my car for church-related business. Another minister told me I can deduct the amount I use for such business from my taxes. How do I do this?
First, shame on your church for not reimbursing your auto expenses for church-related business! A reimbursement—generally at the maximum IRS mileage rate, which is 58.5 cents per mile for the last half of 2008—stewards the church’s resources by leaving more dollars in the pastor’s pocket after taxes. So, work with your church to achieve the reimbursement approach for the future.
Without reimbursement of auto expenses based on adequate substantiation of business miles, your only option is to deduct auto expenses—usually on the mileage method—on Form 2106 and carry forward the amount to Schedule A as a miscellaneous itemized deduction. Your benefit from this approach—assuming you already itemize your deductions—is limited by the 2 percent of adjusted gross income floor on miscellaneous itemized deductions and limited to your income tax rate.
Whether or not you itemize, you can deduct the unreimbursed auto expenses on Schedule SE for self-employment social security tax purposes.
Dan Busby is a certified public accountant, acting president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.