There is no greater power in the world of taxes than that of the simple receipt: the currency of right and wrong, guilt or innocence. What deductions can you claim without a receipt? A good few.
Today, we’ll break down those deductible expenses and explain the Internal Revenue Service (IRS) rule that makes receiptless deductions possible. But I say again: respect the receipt.
Here are the four deductions you can claim without receipts
The four deductions I’ll talk about today are:
- Mileage deductions
- Home office deductions
- Charitable contributions
- Miscellaneous Certain expenses under $75
Going without receipts is never ideal, but as long as you follow the rules and guidelines set by the Internal Revenue Service (IRS), you’ll be in the clear.
As always, I recommend that small business owners consult a Certified Public Accountant (CPA) to verify eligibility.
1. Let’s talk about the $75 rule
IRS Publication 463 states that business owners may deduct expenses under $75 related to the following:
- Travel
- Entertainment
- Gifts
- Vehicle expenses¹
Even though they are travel-related, lodging expenses require receipts. Remember that.
A few qualifiers to the $75 rule
You also still need to have a record of the expense, such as a bank statement. And since bank statements aren’t itemized, it’s a good idea to have a note or diary entry that details the expense’s date, amount, and purpose.
This documentation helps prove your deduction is valid if you’re audited, so I recommend my clients keep all their receipts.
2. Home office deductions
You can claim home office deductions without receipts if you work from home.
It’s a simple calculation: take the square footage of your home office and multiply it by the IRS-approved rate per square foot.
The IRS has a few rules about what constitutes an office. For example, they say the space “must be the exclusive use of a portion of the home for conducting business on a regular basis.”²
3. Log mileage deductions
Here’s a deduction you can make without receipts because no receipt exists in the first place: If you use your vehicle for business, you can claim a deduction of $0.655 per mile.
However, you must keep a mileage log that includes the date, starting and ending locations, the purpose of the trip, and the number of miles driven.
You should keep parking and toll fees receipts since they can also be deductible.
4. Focus on low-value, high-volume charitable contributions
The limit for writing off a charitable contribution without a receipt is $250.³ The same goes for a donation of property valued at more than $250.
The IRS values each donation separately so you can make separate $250 donations without receipts. Lower dollar-value contributions like that might seem pointless. Still, it can be an excellent opportunity for a small business looking to be a part of itself in a community and build PR while helping a cause you support.
Remember, though — you still need a written record, like a canceled check or bank statement, with the date, recipient, and amount donated.
Deduction or not: Keep your receipts
Yes, there are several situations where you can claim deductions without receipts, but you shouldn’t throw out receipts just because you can.
Hold onto your receipts. Even if you don’t need to include them with your tax return, they’ll make accurate filing easier.
If paper receipts aren’t part of your process, get other documents
Receipts aren’t the only documents that record financial transactions. Putting aside tax deductions, you can also provide the IRS with other records instead of receipts in certain situations.
- Canceled checks or other documents reflecting proof of payment/electronic funds transferred
- Credit card statements
- Invoices.⁴
However, the IRS will scrutinize these claims more closely. So, always try to maintain some form of documentation.
Maximizing deductions is work for your CPA.
As I always say, these articles are about bringing awareness of tax, accounting, and advisory services to my clients and small business owners in Fort Worth.
I never write to push D.I.Y. solutions in complex matters. Case in point, small business owners manage two tax burdens: business and personal taxes. That’s enough.
Takeaway: Keep your receipts anyway. Work with a CPA if you believe you need entries in your books.
Need help?
Schedule a discovery call with us today.
Talk soon,
Jeremy A. Johnson, CPA
References
- Publication 463 (2022), travel, gift, and car expenses. Irs.gov. 2023. Available from: https://www.irs.gov/publications/p463
- How small business owners can deduct their home office from their taxes. Irs.gov. 2023. Available from: https://www.irs.gov/newsroom/how-small-business-owners-can-deduct-their-home-office-from-their-taxes
- Topic no. 506, charitable contributions. Irs.gov. 2023. Available from: https://www.irs.gov/taxtopics/tc506
- What kind of records should I keep. Irs.gov. 2023. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/what-kind-of-records-should-i-keep