How can I change the tax settings on allowance income in standard payroll?(ie: Live out allowance is not taxable/insurable but the tax settings automatically tax it)

Hi there,

Thanks for reaching out to the Community. I'll be happy to give you a hand with managing your payroll taxes. 

At this time, there isn't a way to change the tax settings on allowance income. A workaround to this would be paying out the allowances as reimbursements. The reason why I recommend this is that reimbursemnets can be non-taxable in QuickBooks. I'll show you how to reimburse an employee below:

1. Go to the Create ⨁ icon, then select Cheque or Expense.
2. Select the Payee ▼ drop-down and find the name of your employee.
3. Select the Category ▼ drop-down, then select a liability account. Note: If you don't have one yet, you can add a new account.
4. Enter the other information:

•     Amount: Enter the amount owed to your employee. (Break down the amount into different line items if tracking or making billable for multiple customers.)
•     Billable: (Optional) Check the box under Billable if you wish to offset the expense onto your customer's invoice.
•     Customer: (Optional) Select a customer from the drop-down menu if you are looking to track the expense for a specific customer or customers. (Note:  you may turn on the feature. See How do I turn on Billable Expenses?)The Customer and Billable fields are not available in QBO Easy Start, but in QuickBooks Online Plus you may turn on the feature. See How do I turn on Billable Expenses?)     

       5. Select Save or Save and close.         

For more information on reimbursements, I encourage you to check out this helpful article: Reimburse an employee. Feel free to ask questions. I'll be here in case you need further assistance.