Keeping track of deductible expenses can be a time-consuming task, and unless you’re a tax professional, it can sometimes be difficult to know what you can write off and what you can’t.

QuickBooks Online from Intuit tackles that problem by tracking and categorizing your expenses automatically, making it easy to attach receipts to expenses, and tracking your mileage. And if you’re on a paid tier, you can use its Deduction Maximizer tool, which uses artificial intelligence to suggest potential deductions throughout the year based on gaps in your books.

Here’s how the two features work, where they fall short, and what they cost.

How QuickBooks tracks deductible expenses all year

Regardless of which QuickBooks Online plan you’re on, the bookkeeping software can help you track your business expenses throughout the year, so you’re not trying to piece together your deductions during tax season. Here’s how it happens.

Connected accounts and automatic categorization

When you connect your bank, credit card, and other financial accounts, QuickBooks will automatically import all of your expenses and categorize them for you. You can use one of the program’s pre-set categories or create your own.

You may need to adjust the categorization at first, but QuickBooks will learn over time how you categorize both income and expenses to improve its accuracy. You can speed up that process by setting up bank rules for specific categories or merchants.

Note that you can only connect one financial account if you’re on the QuickBooks Online Free subscription, but all the paid tiers offer unlimited connections.

Receipt capture

If you have the QuickBooks mobile app, you can snap photos of your receipts, and the program will match them to transactions and sort them into tax categories for you. Attaching receipts to expenses will make it that much easier to justify a deduction, and you won’t have to keep track of physical receipts.

All paid QuickBooks Online tiers offer unlimited receipt capture, but if you’re on the free tier, you can only upload two receipts per month.

Mileage tracking

Mileage can be a significant deduction for business owners, but if you aren’t tracking as you go, it can be extremely difficult to estimate your mileage accurately.

With the QuickBooks mobile app, you can track trips automatically. As the admin, enable the feature and add the vehicles you want to track. Then, with each trip, open the app and keep it open while you drive. You can also add trips manually if you forget. Once you complete a trip, you can categorize it.

QuickBooks Free users can track up to five trips per month, but if you drive more frequently than that, you can get unlimited trips with a paid tier.

How the Deduction Maximizer finds what you missed

Automated features can make both your bookkeeping and tax filing easier and more convenient, but they only catch what flows through your connected accounts.

The Deduction Maximizer tool, which is part of QuickBooks Business Tax AI (still in beta as of this writing), can help you find extra savings that aren’t already apparent in your books.

How the Deduction Maximizer works

The Deduction Maximizer tool is an always-on assistant that offers personalized suggestions based on a few factors, including:

• Your industry
• The number of employees you have
• Your entity type
• Gaps in your books

For example, let’s say you paid tolls or parking fees on a business trip with cash, or you accidentally put a conference fee on your personal credit card instead of your business account.

Because the AI tool knows the typical expenses for your type of business, it could suggest these as potential deductions, even if they didn’t come through QuickBooks from a linked bank or credit card account. According to Intuit, the tool has helped 58% of businesses uncover key deductions.

What you’ll see

In the Business Tax App, you’ll be able to view different suggestions by tax category. When you click on one, you’ll be able to see how much you’ve spent in that category so far for the year, followed by a list of potential missed expenses.

For each one, you can directly add an expense, or you can set a reminder to autofill the expense description in your schedule 30 days out. You’ll also get tips for handling expenses paid from personal funds.

Who can use it

The Deduction Maximizer is only available to eligible QuickBooks Online users on the Simple Start plan or higher. As of this writing, the Simple Start plan costs $38 per month, though you can get a 50% discount for the first three months if you opt out of the 30-day free trial.

If you’re on a paid plan, you can use the AI tool if your business is classified as a sole proprietorship, S corporation, or partnership. That makes up 95% of QuickBooks Online users, according to Intuit. 

Also, note that while all paid plans get access to the Deduction Maximizer tool, you’ll need an Essentials plan or higher to be able to take advantage of the rest of the Business AI features. The Essentials plan costs $85 per month as of this writing, with the same 50% discount offer for the first three months.

The takeaway

Between automatic expense tracking and categorization, receipt capture, mileage tracking, and Deduction Maximizer, QuickBooks Online goes a long way in helping you maximize deductions on your annual business tax return.

But most of these features only apply to your QuickBooks data, and the Deduction Maximizer tool is in beta mode and isn’t foolproof. So it’s still important to pay attention to your books and try to keep track of all of your expenses throughout the year rather than during tax season.

Frequently asked questions

Does QuickBooks file business taxes?

QuickBooks Online won’t file your business tax return for you automatically. However, you can use Intuit Expert Business Tax, which is powered by TurboTax. You’ll be paired with a human expert who can help you file your return, while Business Tax AI suggests ways you can maximize your deductions.

Is a QuickBooks subscription tax deductible?

A QuickBooks subscription is generally a tax-deductible expense because it’s a cost directly related to managing your bookkeeping, invoicing, and other financial activities for your business.

Can QuickBooks track expenses paid with a personal card?

Yes, but only if you link your personal credit card to your QuickBooks Online account. The Deduction Maximizer tool can suggest potential expenses you put on your personal card rather than a business account. But in general, it’s best to try to keep business and personal accounts and expenses separate.