The Cohan Rule and Lost Receipts: How to Deduct Without a Receipt in 2026 (Without Triggering an Audit)

Published: May 15, 2026 · Reading time: 11 min

TL;DR: The Cohan rule (from Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930)) lets a taxpayer claim a reasonable estimate of a business expense when paper receipts are lost — but only if the taxpayer can prove the expense was actually incurred. Congress carved out a hard exception in IRC §274(d): Cohan does not apply to travel, meals, gifts, vehicle, or listed property. For those categories, no receipt + no log = no deduction. For everything else, a bank statement + contemporaneous note of business purpose is usually enough. The safe move in 2026 is to capture every receipt at the moment of purchase via AI receipt OCR; if a receipt is already lost, this guide is the playbook for reconstructing it so it survives an audit.

Every freelancer loses receipts. The Costco run where the printout faded. The Lyft to the client meeting where the email got mass-deleted. The $42 Office Depot purchase paid by tap-to-pay that never produced a paper slip. The question is whether you can still deduct it — and the answer depends on a 1930 Second Circuit case and a 1962 act of Congress that carved a hole in it.

Where the Cohan Rule Came From

George M. Cohan was the Broadway producer behind Yankee Doodle Dandy and Give My Regards to Broadway. He spent freely on entertaining cast, financiers, and the press — and kept terrible records. When the IRS disallowed his business-expense deductions for lack of receipts, Cohan appealed to the Second Circuit.

Judge Learned Hand wrote the 1930 opinion that became the doctrine:

"Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making. But to allow nothing at all appears to us inconsistent with saying that something was spent."

Two sentences. They've launched 95 years of case law. The doctrine says: if a court is satisfied a business expense was actually incurred but the exact amount can't be proven, the court should estimate, not disallow. "Bear heavily" against the taxpayer for any uncertainty — but allow something.

What the Cohan Rule Actually Lets You Do

The Cohan rule is a substantiation backstop, not an invention license. The taxpayer must still prove:

1. The expense was incurred — bank statement, credit card statement, calendar entry, contemporaneous note
2. It was a deductible business expense — ordinary and necessary in the trade or business under IRC §162
3. A reasonable estimate is possible — based on similar expenses, industry norms, or partial documentation

If those three are met for a non-§274(d) expense, the IRS or Tax Court should allow a deduction at a reasonably approximated amount — typically by reference to similar expenses you did document.

Example — non-§274(d) expense

A freelance writer paid $48 at Office Depot in cash for printer paper, pens, and a binder. The receipt is lost; the cash withdrawal shows on the bank statement. The bank statement, a contemporaneous calendar entry ("Office Depot supply run"), and similar Office Depot purchases earlier in the year all support that $48 of office supplies was incurred. Under Cohan, the IRS should allow a Schedule C Line 22 (Supplies) deduction at $48 or whatever amount the bank shows.

Example — §274(d) expense (Cohan does NOT apply)

The same freelance writer drove to a client meeting and lost the parking receipt and the mileage log. The bank statement shows a $14 parking-garage charge in the right neighborhood, but no mileage log exists for the trip itself.

• The $14 parking fee — might survive under Cohan as a non-§274(d) ordinary business expense, with the bank statement and a contemporaneous calendar entry
• The mileage — does not survive. Vehicle is listed property under §280F. Without a contemporaneous log of date, miles, destination, and business purpose, the mileage is gone

The §274(d) Carve-Out — Where Cohan Stops Working

Congress passed IRC §274(d) in 1962 in response to abuse. The statute requires strict substantiation — receipts AND contemporaneous logs documenting time, place, amount, business purpose, and (for meals and gifts) business relationship — for four categories:

For these categories, no log + no receipt = no deduction, no estimate, no Cohan. The Tax Court has been consistent for decades. Treasury Regulation §1.274-5T(c)(2) hammers the point home: "No deduction shall be allowed on the basis of any approximation."

This is the single most important rule for 1099 workers to internalize. The biggest deductions (mileage, travel, meals) are exactly the ones where Cohan offers no protection.

Decision Matrix: When Can You Use Cohan?

For the full Schedule C line map, see the Schedule C lines hub.

The Reconstruction Playbook

When you've already lost a receipt — here's the order of operations for rebuilding the deduction defensibly.

Step 1 — Find the bank or credit-card transaction

Pull the bank statement or credit-card transaction showing the charge. That's primary evidence the expense was incurred and is the foundation for any Cohan-rule reconstruction.

• Date of charge
• Merchant name as it appears on the statement
• Dollar amount

For SaaS and recurring vendors, the merchant name on the statement is usually enough to identify the vendor. For ambiguous merchants ("SQ *VENDOR123"), pair with Step 2.

Step 2 — Request a duplicate receipt from the merchant

Most modern merchants retain transaction history and will reissue receipts on request:

• Amazon, eBay, Etsy — full order history, downloadable invoice
• Apple, Google Play, Microsoft, Stripe-billed SaaS — invoice history in account dashboard
• Airlines, Vrbo, Airbnb, Hotels.com — booking history, receipt re-download
• Uber, Lyft, Doordash — full trip / order history with receipts
• Most chain retailers (Home Depot, Lowe's, Office Depot) — receipts retrievable by card number + date in store
• Restaurants — usually can produce a duplicate from the POS if asked within 30 days

A duplicate receipt closes the documentation gap entirely. For §274(d) expenses, this is often the only way to recover the deduction.

Step 3 — Write a contemporaneous (or near-contemporaneous) business-purpose note

If the expense was incurred this week and you're rebuilding the record now, do it today. Write a one-line note tied to the date:

"March 14, 2026 — Home Depot $48 — purchased shelving and cable management for home office. Schedule C Line 22 (Supplies)."

That's enough. Notes written months after the fact are weaker but still helpful — the IRS doesn't require the note to be written on the day, just that it's contemporaneous-ish and corroborated by other evidence.

Step 4 — For §274(d) expenses, recover the time/place/purpose/relationship details

Mileage, travel, meals, gifts — you also need:

• Time — date and (for travel) duration
• Place — destination, hotel, restaurant name
• Business purpose — meeting subject, client name, project
• Business relationship (meals and gifts only) — who you ate with or gave to, and their relationship to the business

Pull these from your calendar (Google, Apple, Outlook calendars all preserve history), client email threads, project files, or LinkedIn message history. A contemporaneous calendar entry that says "Lunch with @client@ to discuss Q2 retainer" is exactly the kind of evidence Tax Court accepts under §274(d).

Step 5 — Where the reconstruction is rough, estimate conservatively

If a non-§274(d) expense is genuinely impossible to pin down exactly — you know you spent $30–$50 in cash on supplies at a hardware store — Cohan permits a reasonable estimate. The Tax Court will "bear heavily" on you for the uncertainty, which typically means accepting the low end of your estimated range. Claim $30, not $50.

What the IRS Will and Won't Accept

The Tax Court has built decades of precedent on what counts as a "reasonable estimate":

Generally accepted (non-§274(d))

• Bank or card statement + contemporaneous business-purpose note → full deduction at the statement amount
• Bank statement + similar documented expenses in the same year → approximation by reference
• Industry-norm percentages (e.g., utility allocations) → if methodology is consistent and reasonable

Generally rejected

• Year-end mileage estimate with no daily log
• Bank statement showing a restaurant charge with no attendee or purpose record
• "I always spent about $X" without any contemporaneous documentation
• Travel deductions where no receipts exist and no trip-log was kept
• 100% business use of a vehicle or cell phone with no records to support 100%

The "100%" trap

Claiming 100% business use of a vehicle, cell phone, or computer is one of the most common audit triggers in the IRS playbook. Unless you literally have a second personal device and a second personal vehicle for personal use, 100% is implausible and indefensible without exhaustive records. A documented 70% or 80% with a real methodology wins every time over an undocumented 100%.

How to Never Need the Cohan Rule

The reconstructive playbook above works, but it's a backstop. The cleaner play is to capture every receipt at the moment of purchase so there's nothing to reconstruct.

Three-habit minimum

1. Auto-forward every email receipt to a dedicated tagged inbox. Stripe, AWS, Apple, Vercel, JetBrains, GitHub, Substack, every SaaS — they all email a receipt. One forwarding rule handles 60–80% of your annual receipt volume
2. Photograph paper receipts the moment you walk out of the store. Don't put it in your wallet. Open the receipt app, snap, drop the paper in a Costco bin. The receipt is digital, indexed, and tagged within 15 seconds
3. Log mileage the same week. A contemporaneous mileage log doesn't have to be the moment-of-drive, but it must be close enough that the entries are reliable. End-of-week catch-up is fine. Year-end reconstruction is not

For the broader receipt workflow, see How to organize receipts for a small business and the 5 receipt mistakes freelancers make.

Why AI receipt OCR matters for Cohan defense

The Cohan rule is most useful for the non-§274(d) expenses (supplies, software, advertising, utilities) — but those are also the expenses easiest to capture with AI receipt scanning. A vision-LLM OCR pipeline that parses merchant, total, tax, tip, and line items at the moment of capture means:

• You never need Cohan for everyday operating expenses — the receipt is already in the system
• You can spend your reconstructive energy where it's actually needed: the §274(d) bucket where Cohan doesn't help anyway

For the comparison of AI receipt scanners against manual tracking, see AI receipt scanner vs manual tracking and the best receipt scanner for 1099 workers.

A Sample Audit Defense File

If you get an IRS Schedule C examination, the auditor will ask for receipts and logs in roughly this order:

1. Bank and credit-card statements for the year — all accounts the business touches
2. Receipts for any expense over a threshold the auditor sets (often $75)
3. Mileage log (contemporaneous, with date / miles / destination / business purpose)
4. Travel receipts and trip log for any Line 24a travel deductions
5. Meal receipts plus attendee and purpose notes for any Line 24b meals
6. Home office worksheet if Line 30 is claimed (square footage, residential utility bills, business-use percentage)
7. 1099-NEC copies issued for Line 11 contract labor
8. W-2s and payroll filings for Line 26 wages

For the file structure that survives examination, see How to audit-proof your business expenses.

Frequently Confused: Cohan vs Per-Diem vs Standard Mileage

Three concepts get mixed up:

• Cohan rule — substantiation backstop allowing reasonable estimates for non-§274(d) expenses with partial documentation
• Per-diem rates (IRS Pub 1542, GSA rates) — a Schedule C alternative for travel meal and incidental expenses; you can use the federal per-diem instead of tracking actual meal receipts, but you still need the time/place/purpose log under §274(d). The per-diem is not a Cohan shortcut — it's a separate substantiation regime
• Standard mileage rate ($0.725/mile in 2026) — a Schedule C alternative for vehicle expenses; you replace actual gas/maintenance/depreciation with a per-mile rate, but you still need a contemporaneous mileage log under §274(d). The standard rate is not a Cohan shortcut either — it's a substitute for the actual-expense method, not for the log

Both per-diem and standard mileage make the amount easier to compute; neither relaxes the §274(d) substantiation rules.

Authoritative References

• Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930)
• IRC §274(d) — Substantiation required for certain expenses
• IRC §280F — Listed property
• Treas. Reg. §1.274-5T — Substantiation requirements for travel, entertainment, meals, gifts, and listed property
• IRS — Publication 463: Travel, Gift, and Car Expenses
• IRS — Publication 535: Business Expenses
• IRS — Publication 583: Starting a Business and Keeping Records
• IRS — Topic 305: Recordkeeping

For the broader receipt + mileage workflow, see How to track business mileage for IRS requirements and the 2026 IRS mileage rate guide.