The IRS $75 Receipt Rule: What Freelancers Can Skip and Keep

Some freelancers toss every receipt under $75 because they heard the IRS doesn't need them. Others photograph every $4 parking stub because they never heard of the rule. Both groups have part of it right, and both are working harder or riskier than they need to be.

The $75 rule covers a short list of expense types. Even for those, it lets you skip the paper and nothing else. You still have to write the expense down, and for most of your costs the rule doesn't apply at all.

1.What the $75 Rule Actually Says

The rule comes from Treasury Regulation § 1.274-5(c)(2)(iii). It says you need a receipt or other paper proof for lodging while you travel away from home, and for any other expense of $75 or more. Below $75 you can skip the receipt for those expenses. The IRS also excuses a receipt for transportation costs when one isn't readily available, such as a toll booth that doesn't print one.

For these expenses the IRS still wants a record after you skip the receipt: four facts, written down close to the time you spent the money:

• Amount: what you paid, in dollars and cents.
• Date: the day you spent it.
• Place: the city or the business name.
• Business purpose: the client or project it served.

A line in a spreadsheet reading "$18, Mar 4, Lot on 5th St, parking for the Alvarez kickoff" covers all four. A blank cell and a lost stub covers none.

The IRS calls the paper "documentary evidence," meaning a receipt, paid bill, or similar proof. The written record is separate and counts as its own evidence. In a dispute, a ledger kept at the time of the purchase carries more weight than a list you rebuilt months later from memory.

2.Which Expenses the Rule Covers

The $75 line lives inside Section 274(d) of the tax code. That section sets strict proof rules for a short list of expense types. Everything else follows a looser rule, covered below. Sorting your expenses into three groups tells you which standard applies.

Travel and gifts: the $75 rule applies

Plane tickets, rental cars, taxis, and meals while you're traveling away from home fall under Section 274(d). So do business gifts and vehicles you use for both work and personal driving. Under $75 you can skip the receipt, provided you keep the four facts. At $75 or more you need the receipt.

Lodging: a receipt every time

Hotel and motel stays have no $75 cutoff. A $60 motel room on the way to a client site needs a receipt, because the regulation singles out lodging by name.

Everything else: no dollar cutoff

Software, ads, printer ink, postage, a co-working day pass, and most other costs fall under the general business expense rule in IRC § 162. Section 6001 tells every taxpayer to keep records that support the return, and it names no dollar amount. A $9 app subscription needs the same support as a $900 one, and a bank or card statement line often does that job.

3.What Happens When the Proof Is Missing

For expenses outside Section 274(d), a missing receipt doesn't end the deduction. The best-known case is Cohan v. Commissioner, decided in 1930 by the Second Circuit Court of Appeals. George M. Cohan, the Broadway star, had spent heavily on travel and entertainment but kept almost no records. The tax board threw out the whole deduction. Judge Learned Hand reversed it and wrote: "Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making."

Hand sent the case back so the board could estimate the amount, and he warned that a taxpayer with sloppy records could get a lower number. Courts still apply the Cohan rule to ordinary business costs, as long as you can show the expense happened and give them a fair basis for an amount. For the travel and gift costs in Section 274(d), it no longer works. Congress added those strict rules so that estimates can't replace proof.

Under $75 you can skip the receipt, but you still have to write the expense down.

4.The Cost of Not Logging the Small Stuff

Small purchases add up faster than they feel like they do. Say you spend $25 on average across 96 small purchases in a year: parking, postage, printer ink, an app or two. That is $2,400 of real business cost.

Suppose you're in the 22% federal bracket. Self-employment tax is 15.3% on 92.35% of your profit, about 14.1% of each profit dollar. Together that is roughly 36 cents of tax per dollar. Logging all $2,400 saves $864 (36% of $2,400). Skipping the log because "I don't need receipts under $75" hands that money back.

Your own bracket will differ, and state income tax adds to it. The method stays the same: multiply your small-expense total by your combined rate and compare the result to what a few minutes of logging costs you. Most people find the answer within a minute.

A return with a neat expense ledger and a card statement behind it is easy to support if the IRS ever asks. The longer post on How Long to Keep Freelance Tax Records covers how many years that proof has to last.

5.A Receipt Habit That Takes Two Minutes a Day

A $12 purchase takes ten seconds to log, and a missing log takes hours to rebuild from bank statements next spring. You don't need to photograph everything. A short routine covers both the rule and the cases where it doesn't apply:

1. Log it the same day. Add a line with the amount, date, place, and project while you still remember them.
2. Photograph every receipt of $75 or more. The IRS accepts a clear digital copy under Revenue Procedure 97-22, so the paper can go in the trash once the photo is saved and readable.
3. Photograph every lodging receipt. This holds at any amount.
4. Keep emailed receipts for software. Search your inbox for "receipt" once a month and file what you find.

Pick one place for the log, such as a spreadsheet, a notes app, or an expense tracker, and use only that. Records split across three apps are the ones you can't find when a tax notice arrives.

The $75 rule covers travel and gift costs, leaves out lodging, and still asks you to record the date, amount, place, and purpose. Treat the receipt as optional only in that small slice, and log everything else the day it happens.

If you want to see what a year of small expenses does to your profit, the free profit audit at simplance.org/profit-audit shows your number using the expenses you already track.