Know the $75 Rule for Business Expenses

Written by Coach Janelle CPA on April 21, 2023

The $75 rule applies to certain business expenses where you do not need a receipt. But we emphasize that this rule does not apply to all tax deductions.

Many taxpayers mistakenly apply the $75 rule to all their tax deductions, which can result in a significant loss of deductions and penalties. We encourage you to know the $75 rule and its limitations to avoid potential negative consequences.

IRS Reg. Section 1.274-5(c)(2)(iii) contains the $75 rule, and Notice 95-50 provides a clear explanation of what it applies to. The rule applies to business travel expenses, vehicle expenses, and gifts that cost less than $75. But remember that the $25 limit on deductions for business gifts applies, meaning the practical limit is $25.

It’s worth noting that your bank and credit card statements do not provide sufficient proof of expenses for tax purposes. You need to have both the receipt (proof of what you purchased) and the canceled check or credit card statement (proof of payment) to substantiate the expenditure. 

While the $75 rule may allow you to avoid having a receipt for some expenses, it is crucial to document all your expenses properly. To document a $60 meal consumed during deductible business travel with or without a receipt, for example, you need to prove the amount spent, the date of the meal, and the name and location of the restaurant.

While you don’t need a receipt for the $60 travel meal, your documentation life is easy with a receipt.

We encourage you to keep all your receipts for tax purposes, as they often take less time to keep track of and are better evidence in the event of an IRS audit.

Are you tired of feeling overwhelmed and confused when it comes to tax planning for your business? Do you want to maximize your deductions and minimize your tax liability, but don't know where to start? Look no further than Coach Janelle's tax planning services!

As a seasoned financial coach, Janelle has helped countless business owners navigate the complex world of taxes and develop customized strategies to optimize their financial success. From identifying overlooked deductions to ensuring compliance with the latest tax laws and regulations, Janelle's expertise can help you take your business to the next level.

By working with Coach Janelle, you'll gain peace of mind knowing that your taxes are being handled by a professional who has your best interests in mind. Plus, you'll be able to focus on what you do best - running your business! So, if you're ready to take control of your business finances and make tax season a breeze, contact Coach Janelle today to schedule a consultation. Don't let taxes hold you back - let Coach Janelle help you achieve financial freedom and success!

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