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Michigan Family Law Blog

Friday, July 12, 2019

A Short Blog About Vehicle Expense Deductions and Divorce

In some divorce cases, the court has to go through the parties finances with a fine-tooth comb in order to sort-out what is the appropriate income to use for calculating alimony or child support.  In the recently decided case of Eubanks v Hendrix, Michigan Court of Appeals No. 344102, May 23, 2019; the appellate court found that the referee and the court in that case did not quite get far enough into the nitty-gritty of the parties finances.

While some items and expenses may be allowed as deductions for tax purposes, the same deductions are not always allowed when determining a person's income for alimony or child support.  In the Eubanks case, the mother questioned how the court calculated the father's income, particularly the deduction for his vehicle.  She contended that the trial court should have considered the percentage of time the father used the vehicle as his personal vehicle compared to the percentage used for business in determining his income. The Michigan Court of Appeals agreed with her.

The appellate court found that while business-related vehicle expenses are deductible for the purpose of determining an individual’s net income under the child support formula, personal vehicle expenses are not.  in calculating the father's income, the referee noted in its recommendation that the father stated he used his leased vehicle 100% for business. The total monthly cost including registration, gas & oil, insurance and parking and tolls was $1,419.85 per month. This is a total of $17,038.20 per year. This was subtracted from the father's income to yield a gross annual income of $77,652.00.

However, some of the vehicle expenses should have been considered his personal expenses. The father actually initially testified that the vehicle at issue was, in fact, his personal vehicle, but that he wrote it off as a business vehicle for tax purposes. The father later testified that the “majority of the vehicle was used for business.”  He indicated that he used the vehicle for personal purposes approximately 17% of the time, and that he spent most of his time riding with his wife in her personal vehicle.  When ultimately rendering the recommendation, however, the referee seemed to ignore these statements and simply noted, apparently that defendant “used his leased vehicle 100% for business.”   

The Michigan Court of Appeals then reversed the court's decision regarding the income determination and indicated that the court should have only deducted 83% of the overall expense.  However, it should be noted that this makes a difference of less than $3,000 to the father's calculated income and will probably have very little to no impact on the actual amount of child support.  It was probably not worth the time, money and effort of appealing this matter and that should have been taken into consideration before filing the appeal. 

If you have any questions regarding divorce, separation, alimony or custody, please contact our office to schedule a consultation. 

 


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