Quickbooks Online Essentials: How to record an out-of-pocket healthcare expense?

dmccth · ‎October 08, 2020

Hi all,

I am self-employed this year and using QuickBooks to do my accounting. When I do a google search for this question, it brings up the self-employed version of Quickbooks which I don't think is still available. Right now I am using Quickbooks Online Essentials.

Is there a way to record out-of-pocket healthcare expenses in Quickbooks? such as an eye exam that I recently had? Or, will I need to record these expenses externally for when tax season comes around?

Many thanks.

MichelleBh · ‎October 11, 2020

There's no need to say sorry here in the Community, @dmccth.

I'd agree with Rustler that health insurance is an itemized deduction. Let me give you insights about the two primary types of deductions available in the United States under tax law.

Standard deduction - is a flat amount that you can deduct from your tax bill. The amount of this deduction varies based on your filing status.

Itemized deductions- allow you to deduct medical taxes, taxes paid, home mortgage interest, and charitable gifts. Itemizing means deducting each deductible expense you incurred during the tax year.

For more information on this, you may check out this article: The ultimate guide to tax deductions for the self-employed.

For class tracking, it's only available in QuickBooks Online Plus and Advance. Also, class tracking is different in categorization. For more information, you may take the time to read the article provided by my colleague Maryann.

In recording the itemized deduction, I'd suggest consulting your accountant for further assistance with the whole process and on how should this be handled.

Please browse through these articles for your future reference. This link contains a lot of information about managing your tax deductions in QBO.

Let me know if you have any questions. I'm always here to help. Take care!

View solution in original post

Rustler · ‎October 09, 2020

That is a personal itemized deduction at tax time, it is not a business expense

https://www.irs.gov/taxtopics/tc502

that link will help, and especially the link at the end of the article

dmccth · ‎October 09, 2020

Ok, that is what I saw as well. Does QuickBooks have a place to put itemized deductions or do I need to record that elsewhere in like an excel spreadsheet?

dmccth · ‎October 09, 2020

Ok, that is what I read as well but I wanted to double check. Does QuickBooks track itemized deductions someplace or will I need to record that in a separate program like an excel spreadsheet?

MaryAnn_E · ‎October 09, 2020

Hi there, @dmccth

You can use the class tracking feature in QuickBooks Online by making each line of business and personal transaction a separate class. By using it, you can track the associated account balances on transactions and run reports to view the account balances for a given class (business) at any time. Let me show you how.

To begin, turn on class tracking to add a class field or column on your forms. Here's how:

Go to the Gear icon and select Account and Settings.
On the left pane Advanced, then select the Edit icon in the Categories section.
Mark the Track classes checkbox.
Select the Assign classes drop-down, then select One to entire transaction or One to each row in transaction.
Hit Save, then Done.

After that, you can create an expense where you can select the category of what you paid for. Additionally, when you tag a class to a transaction, you won't have to add classes again. But if a downloaded bank transaction doesn’t match with any existing transaction, you can assign a class to it and add it as a new record.

For more information about class tracking, I've attached an article you can use how to run reports and create a budget for each class: Get started with class tracking in QuickBooks Online.

You can always leave a comment below if you have other questions.

dmccth · ‎October 11, 2020

Thanks for the reply!

I'm completely new to being self-employed and quickbooks so forgive me if I'm not asking questions in the correct way.

When something is tagged to a class, will it show up as an expense? From what the previous poster mentioned, out-of-pocket health insurance is not considered an expense but an itemized deduction.

dmccth · ‎October 11, 2020