I was looking to add an outlet near my light switch in the garage. When I opened the box for the switch I noticed that the neutral is wired to the ground. In the picture of the switch, the top wire screwed to the switch is the only hot wire in the box. Its hard to see but it comes from bottom right corner and the neutral from that same wire is wired to the ground. The wire at the top was stabbed all the way in to the back of the switch and i pulled out to test it which is why it is out. The second picture is the garage light. Two sets of wires coming in to the box. Have never seen anything like this. Did some reading on this site and couldn't find the same scenario. Any help on explaining why this is set up this way is appreciated.
The ground wire is ONLY for emergencies. The 'return' from an appliance or light MUST be a separate neutral wire. Re: "Any help on explaining why this is set up this way" is very simple: THEY WIRED IT UNSAFELY IN VIOLATION OF THE ELECTRICAL CODE!
Yes, you need to run more wire. People do all sorts of crazy things. The NEC exists to prevent fires and electrocution.
You can look up the current electrical code at NFPA.org (free registration required) but there's no search function. Read about grounding and bonding in Section 250.
I'm not quite clear what wires go where, but the outside light needs a switched hot, and a neutral to return from that. In previous versions of the NEC, you could have the hot and neutral come to the box holding the light, and lead the hot from the light box to the switch then back to the light. IIUC, this is no longer allowed.
The only way to do it now is to have hot go to the switch, then to the light, and run a neutral from the same branch circuit to the light. Typically this runs with the switched hot wire.
So-white (neutral), black (hot) and bare ground to the switch box, black to switch, neutrals connected together, grounds connected together (but not to neutral) then white (neutral), black (switched hot) and bare ground to the light. If you don't have enough conductors for this, you need to run more wire.
Is the supply a 3 wire black, white , bare copper if it is the neutral connected to the ground at this point is a code violation. The only place the 2 are tied together is in the main panel. I would remove the neutral as this is not safe.