The myth: you need a paper receipt for every business expense, in a shoebox, kept until the end of time.
The reality: more nuanced. Sometimes a credit card statement is enough. Sometimes you need a receipt + a contemporaneous log. Sometimes nothing short of a witness will satisfy the auditor.
Here's what the IRS actually requires.
The general rule
§162 lets you deduct "ordinary and necessary" business expenses. §6001 requires you to keep records that "are sufficient to establish the deductions claimed." That's the legal floor.
What constitutes "sufficient" depends on the expense type and amount.
The $75 rule
For most business expenses, the IRS requires a receipt for any single payment of $75 or more. Below $75, a credit card or bank statement showing the date, amount, and payee is generally enough substantiation.
The exception that catches people: lodging always requires a receipt, regardless of amount. A $40 motel night needs a receipt; a $50 office-supply order does not (unless you want to be safe).
Categories with stricter rules
Three expense categories require contemporaneous records beyond just a receipt:
1. Travel
You need:
- Date and place of travel
- Business purpose
- Receipt for any single expense ≥ $75 (always, for lodging)
A bare receipt without the business purpose noted is incomplete. Auditors regularly disallow travel deductions where the purpose wasn't documented in real time.
2. Meals (50% deductible)
You need:
- Date, place, amount
- Business purpose
- Names of people present (for meals with associates / clients / prospects)
For a solo working lunch on a business trip, the "names" requirement reduces to "myself."
3. Vehicle / mileage
Four required fields per trip — date, miles, business purpose, destination. See mileage log requirements for the full breakdown.
What a "receipt" is and isn't
The IRS accepts:
- Original paper receipts
- Photo / scan of paper receipts (digital is fine — Rev. Proc. 97-22)
- Vendor invoices and statements
- Cash register tape with date and items
- Email order confirmations
The IRS does not accept (alone):
- Just a credit card transaction with no detail
- A handwritten note with no vendor record
- A photo of a checkbook stub
- An email receipt that doesn't show items purchased
The principle: you need to show what you bought, not just that you spent money.
Per diem rates (the receipt-free shortcut for travel)
Instead of tracking actual meal and incidental expenses on business trips, you can use the IRS per diem rate (varies by city; published in IRS Notice annually).
The per diem covers meals + incidentals only. Lodging is always actual-expense and requires a receipt.
Self-employed individuals can use the M&IE per diem (around $59–$92/day for high-cost cities) instead of tracking each meal. Saves real time on multi-city travel. The records you keep: dates of travel, destinations, business purpose. No meal receipts required.
Digital receipts: the IRS standard
Rev. Proc. 97-22 codified that digital images of paper receipts are equivalent to originals, provided the digital records:
- Are accurate and legible
- Are stored in a manner that preserves data integrity (i.e., not editable later)
- Can be retrieved on request
Phone-photo receipts in any modern bookkeeping app meet this standard. ExpenseGhost stores receipt images alongside the matched transaction; same for Hurdlr, Expensify, etc.
The "Cohan rule" — and why not to rely on it
In Cohan v. Commissioner (2d Cir. 1930), the court allowed George M. Cohan a reasonable estimate of business expenses he hadn't documented. The principle survives: where a taxpayer clearly incurred expenses but lacks records, the court can estimate.
But: §274(d) (passed after Cohan) excludes travel, meals, gifts, and listed property (including vehicles) from the Cohan rule. For these categories, no records = no deduction. Period.
For other categories (office supplies, software, repairs), Cohan still applies but the estimate must be "reasonable" and the absence of records will be interpreted against you.
Bottom line: rely on Cohan only for genuinely lost records, not as a strategy.
Retention period
| Category | Minimum retention | |---|---| | Returns and supporting records | 3 years from filing date | | Records related to omitted income > 25% | 6 years | | Records related to fraud or non-filing | Indefinite | | Employment tax records | 4 years from due date or payment | | Asset / depreciation records | 3 years after disposing of asset |
Practical advice: keep everything for 7 years. Cloud storage is functionally free.
What auditors look for
When the IRS audits a Schedule C return, the typical receipt review:
- They sample 10–20 transactions (often the largest, or one per category).
- They request the receipt + a substantiation log if applicable.
- They check whether the receipt date and the bank/CC date match.
- They check whether the line items appear personal (a "business meal" with $40 of beer may get questioned).
- They look for patterns — round numbers everywhere, identical receipts duplicated, a vendor with no plausible business connection.
What survives: organized digital records with each receipt linked to a transaction, plus contemporaneous notes for meals/travel/mileage.
What fails: shoebox, last-minute reconstruction, missing $75+ receipts, missing business purpose on travel.
How ExpenseGhost helps
ExpenseGhost's receipt OCR pulls vendor, date, amount, and line items, then matches the receipt to the corresponding bank transaction automatically. Each receipt is stored with audit-ready metadata. The year-end export packages receipts alongside transactions for handoff to your CPA. See pricing.
FAQ
Do I need a receipt for $74?
Technically no — credit card or bank statement is enough substantiation. But why not capture it? The marginal cost is 5 seconds.
What about cash purchases?
Always get a receipt. Cash purchases without receipts are the most-disallowed expense type in audits.
Can I claim mileage without a log?
§274(d) excludes vehicle expenses from the Cohan rule. No log = no mileage deduction. Even a bad log is better than no log.
What if I lost a receipt?
Reconstruct. Get a duplicate from the vendor (most retailers can reprint a receipt within 90 days). If you can't, keep the credit card record and a contemporaneous note explaining the purchase. Legal basis is shakier, but it's better than nothing.
Do I need to keep receipts for capital expenses (depreciation)?
Yes — until 3 years after you've disposed of the asset and reported any gain or loss. For real estate or equipment with long lives, that means decades.
How does this fit with my overall books?
Receipts are one piece. The full discipline — accounts, classification, monthly review — is in bookkeeping for freelancers: 5-step minimum and Schedule C deductions checklist 2026.
ExpenseGhost provides tax estimates and tax-ready exports. We are not a tax preparer and do not file returns. Estimates are informational — verify every number with a licensed tax professional before filing.