Learn how to set up voluntary deductions in your online Payroll account.
Voluntary payroll deductions are amounts subtracted from an employee's net pay to cover the cost of things such as employee-paid benefits offered by the employer, or general deductions like a charitable donation.
Note: Pretax deductions must come out of a taxable wage item. They will not deduct from a reimbursement type wage.
For deductions such as retirement plans, health insurance, HSA plans, or FSA, your provider can help you decide on the amount to be withheld and determine the taxability.
Deduction vs Contribution
A deduction is an amount paid by an employee and deducted from each paycheck. A contribution is paid by the employer and often counts as additional pay or wages.
For example, an employee and an employer might pay some part of the cost for a health insurance plan. The employee-paid portion is called a deduction. The portion paid by the employer is called a contribution.
Learn about the types of voluntary deductions
Voluntary payroll deductions include medical, dental, and vision insurance premiums (both pretax and post-tax). Garnishments are not voluntary deductions.
The chart below explains which deductions are supported in QuickBooks Online Payroll.
For the taxability of each deduction, see Supported pay types and deductions explained for more details.
|Health Insurance||Medical, Dental, or Vision Insurance|
|Retirement Plans||401(k), SIMPLE 401(k), 403(b) , SARSEP, SIMPLE IRA, Company-only plan, Roth 401(k), Roth 403(b), and catch-ups|
|FSA Plans||Dependent Care FSA** and Medical Expense FSA|
|HSA Plans||Taxable HSA and Pretax HSA|
|Other Deductions||Cash Advance Repayment, Loan Repayment, other after-tax deduction|
Note: We don't support the Dependent Care FSA in Pennsylvania.
Set up a new deduction item to employees
Add a deduction item for your employees. Once a deduction is set up for one employee, this deduction item appears as an option to select when adding a deduction to the rest of your employees.
Assign a deduction item to employees
You can add the same deduction you've set up to an employee to other employees by assigning it to them.
Understanding deduction guidelines
Retirement plan deductions and contributions
There are retirement plan contributions that are tax-deferred. This means that the employees' wages are reduced by the amount of the contribution before certain taxes are calculated.
See Retirement plan deductions and contributions for more details.
Cafeteria plans (Section 125 plans) and flexible spending accounts
If you have a cafeteria plan (also known as a Section 125 plan), your employees can pay medical, dental, and vision insurance premiums with pretax paycheck deductions.
See Section 125 cafeteria plans for more details.
Health Savings Account contributions and limits
An employee is eligible to set up a health savings account (HSA) if they satisfy all federal requirements, such as participating in a high-deductible health plan (HDHP). Both you and the employee can contribute to their HSA.
See Set up Health Savings Account (HSA) plans for more details.