IRS $75 Receipt Rule: Exceptions, Records, and Penalties

The IRS $75 receipt rule requires you to keep a vendor receipt for any single travel, meal, or business gift expense of $75 or more. Below that amount, you don’t need the paper receipt, but you still have to document the expense in your own records. The threshold comes from Treasury Regulation Section 1.274-5, and it only covers a specific set of expense categories that the IRS scrutinizes because they blur easily into personal spending.¹

What the Rule Actually Covers

The $75 threshold applies to travel, meals, and business gifts. It does not apply to office supplies, software, equipment purchases, or other ordinary business costs. Those follow general recordkeeping requirements, where receipts are always advisable but not mandated by Section 274.

Travel here means airfare, taxis, rideshares, rental cars, and similar transportation. Lodging is treated separately with stricter rules. Meals qualify when you or an employee is present and the cost isn’t extravagant, and the deduction itself is capped at 50% of what you spend.² The temporary 100% deduction for restaurant meals expired after 2022, so the 50% limit applies for 2026.³

Business gifts also fall under the rule, though the deduction ceiling is only $25 per recipient per year. If you and your spouse both give gifts to the same person, you count as one taxpayer for that $25 cap. Small promotional items costing $4 or less with your business name permanently engraved don’t count toward the limit.⁴

What Counts as a Valid Receipt at $75 and Above

A credit card statement alone doesn’t qualify. The IRS wants a document from the vendor, whether a receipt, invoice, or bill, that shows enough detail to verify what you paid for.¹ The document must show:

The amount paid, itemized where possible (this matters most for hotel bills that bundle room, tax, and incidentals).
The date of the transaction.
The vendor’s name and location.
Enough detail about what was purchased that an auditor can identify it. “Dinner for two” or “airport taxi to client office” works; a bare dollar amount does not.

Restaurant receipts usually satisfy this because they itemize food and drink. Vague service receipts sometimes need a handwritten note from you explaining what the charge covered.

What You Have to Keep When the Expense Is Under $75

Skipping a receipt is not the same as skipping records. The IRS still requires you to substantiate four elements for every deductible travel, meal, or gift expense, regardless of amount:⁵

Amount. A bank or credit card statement typically covers this.
Time and place. The date and location of the expense.
Business purpose. Why you incurred the expense and how it connects to your business. “Business meeting” is weak. “Lunch with vendor to discuss Q3 supply contract” is what auditors want to see.
Business relationship. For meals and gifts, the names and business affiliations of the people involved.

The reliable approach is pairing your credit card statement, which captures the amount and date, with a contemporaneous log where you record the purpose and attendees. Contemporaneous matters here. Entries made at or near the time of the expense carry far more weight than a spreadsheet reconstructed at tax time, and the IRS treats the combination as adequate records under Section 274 when the log entries are timely.¹

Failure to document business purpose is the single most common reason deductions get denied in audits. The dollar amount is rarely the problem. The “why” is.

Exceptions That Override the $75 Line

Lodging Requires a Receipt at Any Amount

Lodging is the biggest exception. You need a receipt for every hotel or lodging expense regardless of cost, even a $40 motel bill. A credit card statement showing a hotel charge isn’t enough. The IRS wants the itemized folio from the property showing room charges, taxes, and any other fees separately.⁵ Hotel bills often mix personal charges like minibar or in-room movies with legitimate business costs, and only the itemized bill lets an auditor separate them.

Local Transportation Without a Readily Available Receipt

When you take a taxi, subway, bus, or other local transportation and a receipt isn’t readily available, the IRS waives the receipt requirement even if the fare exceeds $75.¹ You still need to document the four elements. Rideshare apps now generate automatic receipts, so this exception matters less than it once did, but it still applies to traditional cabs and public transit.

Federal Per Diem Allowances

If your employer uses the federal per diem method under an accountable plan, you don’t need to keep individual meal and incidental expense receipts at all. The employer pays you a flat daily rate based on where you travel, set at $319 per day for high-cost localities and $225 for other areas during the period running from October 2025 through September 2026.⁶ The substantiation burden shifts to documenting the time, place, and business purpose of the trip.

Vehicle Mileage

Business use of a personal vehicle is substantiated through a mileage log, not receipts. For 2026, the standard mileage rate is 72.5 cents per mile.⁷ The log needs the date, miles driven, destination, and business purpose of each trip.⁸ The $75 threshold doesn’t touch mileage-based deductions.

What Happens When a Receipt Is Missing

Losing a receipt for travel, meals, or gifts puts you in a worse position than losing a receipt for other business costs. For general deductions, courts sometimes allow estimated amounts under the Cohan rule: if you can prove an expense existed but can’t document the exact amount, a court may permit a reasonable estimate. Section 274 explicitly overrides this for the categories the $75 rule covers. Treasury regulations state that approximations and estimates are not permitted for travel, meal, and gift expenses.¹

A lost hotel receipt for a $200 stay can wipe out that deduction entirely, even if your credit card statement shows the charge. The statement proves you paid; it doesn’t satisfy the itemized receipt requirement for lodging. For expenses under $75 where you never had a receipt to begin with, you’re in better shape as long as your contemporaneous log and card records together cover the four required elements.

Penalties for Weak or Fabricated Records

The usual consequence of poor records is losing the deduction. The IRS disallows the expense, your taxable income goes up, and you owe additional tax plus interest from the original due date.

The accuracy-related penalty adds 20% to any underpayment caused by negligence, which the IRS defines as failing to make a reasonable attempt to comply with the tax code.⁹ Claiming deductions you can’t substantiate fits within that definition. If the disallowed deductions create a substantial understatement, meaning the underpayment exceeds the greater of 10% of the correct tax or $5,000, the same 20% penalty applies even without a specific finding of negligence.

Fabricating receipts or inflating expenses moves into fraud territory. The civil fraud penalty is 75% of the underpayment attributable to the fraudulent claims, and the IRS has no statute of limitations for assessing it.¹⁰ Round numbers on every receipt, identical handwriting across vendors, and expenses that don’t match travel patterns are common red flags auditors look for.

How Long to Keep the Records

The general rule is three years from the date you file the return, or the due date if later.¹¹ That minimum applies only when your return is accurate and complete. If you don’t report income that exceeds 25% of the gross income shown on your return, the IRS gets six years. If you never file, or file a fraudulent return, there is no time limit.¹²

Keeping business expense records for at least six years is worth the minimal effort, especially with digital storage. Records supporting property basis or depreciation should be kept as long as you own the asset, plus the applicable limitations period after you dispose of it.¹³

1
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
2
Internal Revenue Service. Topic No. 511, Business Travel Expenses
3
Internal Revenue Service. Here’s What Businesses Need to Know About the Enhanced Business Meal Deduction
4
Internal Revenue Service. Income and Expenses 8
5
Internal Revenue Service. Instructions for Form 2106 (2025)
6
Internal Revenue Service. 2025-2026 Special Per Diem Rates
7
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile
8
Internal Revenue Service. Topic No. 510, Business Use of Car
9
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
10
Internal Revenue Service. 20.1.5 Return Related Penalties
11
Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
12
Internal Revenue Service. How Long Should I Keep Records?
13
Internal Revenue Service. Instructions for Form 1120 (2025)