Don’t Expose Yourself with Improper Use of the $75 Rule

When the $75 rule applies, you don’t need a receipt. The problem with this rule is that it is often thought to apply to all tax deductions. That’s wrong. Now, think of the taxpayers who incorrectly apply the $75 rule to all of their tax deductions. They are exposed to a massive loss of deductions and likely some penalties too. The $75 Rule IRS Reg. Section 1.274-5(c)(2)(iii) contains the $75 rule.1 Notice 95-50 contains a clear explanation of what the $75 rule applies to.2 Here’s how it works: You don’t need a receipt for business travel expenses that are less than $75, with two exceptions: (1) you always need a receipt for ...