Bookkeeping Basics

How to Record Business Expenses Correctly

Written & reviewed by Ram Singh, founder, Numerawise Solutions · Last reviewed September 1, 2026

Record four things at the time of the spend and keep what proves them. The trap is the “no receipt under $75” rule — it is real, but it does not mean what almost everyone repeats.

Short answer: for every business expense, record four things at the time it happens — how much, what date, what it was for, and why it was a business cost — then keep the document that proves it. Do that consistently and the categorising, the tax return and any future examination become clerical. Almost every expense problem we untangle traces back to a record written months later from memory, not to a wrong account code.

The rule almost everyone gets wrong

You will read everywhere that you do not need receipts for business expenses under $75. That threshold is real. It is also far narrower than the way it gets repeated.

It comes from Treasury Regulation §1.274-5(c)(2)(iii)(A), which requires documentary evidence for “any expenditure for lodging while traveling away from home” and “any other expenditure of $75 or more.” But that regulation implements Internal Revenue Code §274(d), and §274(d) reaches exactly three things: travel (including meals and lodging away from home), gifts, and listed property. Entertainment was a fourth category until the Tax Cuts and Jobs Act struck it in 2017 — which is why the old regulation text still lists it and the statute no longer does.

So $75 is an exception inside a strict regime, not a general permission slip. Two consequences people miss:

• Lodging always needs documentary evidence, no matter how small. A $60 motel night still needs the bill.
• Ordinary business expenses were never in that regime at all. Rent, software, supplies, contractor payments, advertising, utilities — §274(d) does not govern them, so the $75 threshold does not apply to them either way. What governs them is §6001, and Treasury Regulation §1.6001-1(a) requires records “sufficient to establish the amount of gross income, deductions, credits, or other matters” on the return.

The practical translation: there is no dollar figure below which records stop mattering. There is only a figure above which, for travel and gifts, a written log alone stops being enough.

What to capture on every expense

The elements §274(d) demands make a good template for everything, because they are what an examiner asks for:

Element	Travel	Gifts
Amount	Each separate cost — transport, lodging. Daily meals may be grouped.	Cost of the gift to you
Time	Dates of departure and return; days spent on business	Date of the gift
Place / description	City or town of destination	Description of the gift
Business purpose	Reason for the trip, or the benefit expected	Reason for the gift
Business relationship	—	Recipient’s name, title or occupation

Timing carries real evidentiary weight. Publication 463 puts it plainly: “A timely kept record has more value than a statement prepared later when there is generally a lack of accurate recall.” A log kept weekly counts as timely. And where records are missing, §274(d) is unforgiving in a way general expenses are not — the regulation states outright that it “supersedes the doctrine found in Cohan v. Commissioner,” the case that otherwise lets a court estimate. For travel, gifts and listed property, a good-faith estimate is not a fallback.

Mileage in 2026: the year splits in half

This is the single most likely thing to be wrong in your 2026 books, because the rate changed mid-year and most templates were built in January.

• Miles driven before 1 July 2026: 72.5 cents per mile (Notice 2026-10).
• Miles driven on or after 1 July 2026: 76 cents per mile (Announcement 2026-11, which modified Notice 2026-10 in response to fuel price rises).

A 2026 mileage log therefore has to be split at 30 June. On 12,000 business miles spread evenly across the year, a flat 72.5 cents understates the deduction by about $210 and a flat 76 cents overstates it by roughly the same. Both are avoidable by adding a rate column to the log rather than applying one rate at year end.

One rule before choosing a method: if you own the car, the standard rate must be elected in the first year the car is available for business use — you cannot claim actual expenses in year one and switch to mileage in year two. On a leased car the standard rate binds you for the whole lease, renewals included.

Expense it or capitalise it?

The de minimis safe harbor in Treasury Regulation §1.263(a)-1(f) lets you expense a laptop instead of setting up a depreciation schedule for it. The ceiling is $2,500 per invoice, or per item as substantiated by the invoice, without an applicable financial statement; $5,000 with an audited AFS. A trap for anyone checking the source: the regulation text still reads $500. The $2,500 figure comes from Notice 2015-82. Cite both, or your own reference will look wrong.

Two conditions catch people out. It is an annual election — a statement headed “Section 1.263(a)-1(f) de minimis safe harbor election” attached to a timely filed original return, not revocable. And you must have had accounting procedures treating such amounts as an expense in place at the beginning of the year. Without an AFS the regulation does not require those procedures to be written — “written” appears only in the AFS version — but a one-paragraph policy dated before 1 January costs nothing and removes the argument.

Paying yourself back, and paying your team back

When you or an employee spends personal money on the business, the documentation decides whether the reimbursement is taxable wages. An accountable plan under Treasury Regulation §1.62-2 needs three things: a business connection, substantiation, and return of any excess. Meet all three and the reimbursement is not income and does not go on a W-2.

The regulation supplies fixed-date safe harbours to write a policy around: an advance within 30 days before the expense, substantiation within 60 days after, and return of any excess within 120 days after. On the detail expected it is blunt: “It is not sufficient if an employee merely aggregates expenses into broad categories (such as ‘travel’).”

Meals, gifts, and one change specific to 2026

Business meals remain 50% deductible under §274(n)(1), or 80% for workers subject to Department of Transportation hours-of-service limits. The temporary 100% deduction for restaurant food and beverages applied only to amounts paid before 1 January 2023; the statute still carries that cut-off. Business gifts stay capped at $25 per recipient per year under §274(b)(1), a figure never indexed for inflation.

New this year, and easy to miss: employer-provided meals and employer-operated eating facilities became nondeductible for amounts paid after 31 December 2025. The One Big Beautiful Bill Act narrowed that disallowance rather than removing it, preserving deductions for food sold to customers and for certain maritime, fishing and northern-Alaska processing operations. If the office lunch has been running through the same account as client meals, 2026 is the year that account needs splitting.

A routine that makes this clerical

This is the proof side of the entry; the posting side, including which month a transaction belongs to under cash or accrual, is in how to record your business transactions.

1. Separate the money. No statute requires a business bank account, but Publication 583 says “you should keep your business account separate from your personal checking account,” and it is the cheapest way to satisfy §6001.
2. Capture at the point of spend. Photograph the receipt and type the business purpose in the same moment. That sentence is the element nobody reconstructs later.
3. Log mileage weekly, with a rate column. In 2026, split at 30 June.
4. Categorise weekly, while the answers are still recallable.
5. Reconcile monthly. Our month-end close checklist and the walkthrough of bank reconciliation in QuickBooks cover the sequence.
6. Review the contractor list in December, so W-9s are in hand before 1099 season.

How long to keep it all

Keep records supporting a deduction until the period of limitations for that return closes. Publication 583: three years ordinarily; six years if you omit more than 25% of gross income; seven years for a worthless-securities or bad-debt claim; no limit if you file a fraudulent return or file none. Employment tax records go four years. Scans qualify — “all requirements that apply to hard copy books and records also apply to electronic storage systems” — and originals may be destroyed once the system is shown to reproduce them legibly.

If expenses are being recorded once a quarter from a shoebox, no amount of category tuning fixes it. That is what our bookkeeping service is for.

Mileage rates, safe-harbor thresholds and deduction limits change — sometimes mid-year, as the 2026 mileage rate did. Figures above were verified against IRS and Treasury primary sources (IRC §§274, 6001; Treas. Reg. §§1.62-2, 1.263(a)-1(f), 1.274-5, 1.6001-1; Notice 2026-10; Announcement 2026-11; Notice 2015-82; Publications 463 and 583) on 1 September 2026. General information, not tax advice for your situation.