Tax & Financial Consulting Services
The $75 Rule for Receipts
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I received this question from a G&G subscriber and thought it would be useful to some of you.
Question: My CPA says there is no such thing as a $75 rule for receipts on vehicle expenses. He says I need receipts for all my car expenses.
Is this true? And, can you give me the rule that says I do not need receipts if the vehicle expense is less than $75?
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Answer: No! You do not need receipts for your vehicle expenses under $75, or any other expense less than $75 “EXCEPT” for lodging.
The $75 rule is contained in IRS regulation section 1.274-5(c)(2)(iii), and IRS publication 463 “Travel, Entertainment, Gift, and Car Expenses.”
The best explanation of what this rule says is found in IRS notice 95-50, which states that the $75 rule applies to travel, entertainment, gifts, and listed property.
IRC section 280F(d)(4) states the "listed property" includes any passenger automobile and any other property used as a means of transportation.
Bottom Line (BL):, this means that your vehicle is listed property; therefore, you do not need a receipt for a vehicle expense that is less than $75.
Keep one key point in mind: Tax law requires proof even when the law says you don't need a receipt. So, always think proof. If you don't have receipts, do your gas expenses help prove your mileage and does your mileage help prove your gas expenses? Do you log down the cost of gas on a timely basis? The IRS gives you up to one week for this timely basis test.
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