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: Pre-tax 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 deductions, see Supported pay types and deductions explained for more details.

Category Types
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 deduction item to employees

Set up a deduction 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.

QuickBooks Online Payroll and QuickBooks Full Service Payroll

  1. Select Workers, then Employees.
  2. Choose the employee's name.
  3. Select Edit beside Pay.
  4. In section 4, select Edit ✎.
  5. From the drop-down ▼ menu, select Deductions/contributions.
  6. Select the deduction type and category.
  7. Enter the description and amount.
  8. Select Ok.

Intuit Online Payroll

  • Select Employees, then select the employee's name.
  • In the Deductions and Contributions section, select Edit.
  • Select Add a Deduction under Deduction for Benefits.
  • From the Deduction drop-down ▼ menu, select New deduction.
  • Choose a Category and Type.
  • Add a description.
  • Enter a $ amount or % of Disposable Income.
  • Select Save, then OK.

Intuit Full Service Payroll

Contact Support to set up a deduction.

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.

QuickBooks Online Payroll and QuickBooks Full Service Payroll

  1. Select Employees.
  2. Select an employee from the list.
  3. In the Deductions and Contributions section, select Edit.
  4. Select Add new deduction or contribution.
  5. In the new window, select the name of the deduction you'd like to add.
  6. As applicable, define the per-pay period deduction and annual maximum for the deduction you're adding. Do the same for your company's contribution.
  7. Select Done.

Intuit Online Payroll

  1. Go to Employees.
  2. Select the employee's name.
  3. In the Deductions and Contributions section, select Edit.
  4. Select Add a Deduction under Deduction for Benefits.
  5. Select the Category and Type of deduction.
  6. If assigning a Health Insurance deduction for the first time, select Taxable Insurance Premium or Pretax Insurance Premium.
  7. Select % of Gross Pay or $ Amount from the Amount ▼ drop-down menu. If using the same amount for every paycheck, enter the amount in the box. If varying the amount by paycheck, leave the box blank. (You'll enter the amount when creating the employee's paycheck.)
  8. Enter an annual maximum amount (optional). (This will be prefilled for some deduction types.)
  9. Select Save, then OK.

Intuit Full Service Payroll

Note: For Intuit Full Service Payroll customers, if this is a new deduction, contact Payroll Support to set up a deduction.

  1. Select Employees.
  2. Select an employee from the list.
  3. In the Deductions and Contribution section, select Edit.
  4. Select Add new deduction or contribution.
  5. In the new window, select the name of the deduction you'd like to add.
  6. As applicable, define the per-pay period deduction and annual maximum for the deduction you're adding. Do the same for your company's contribution.
  7. Select Done.

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.