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Help With Stock Dividend that is both Taxable and Tax Free?

TexMike

Question 1: Is there a way to handle a single stock that is in my taxable brokerage account AND in my non-taxable IRA account? Currently I have the security set up as taxable (the tax free box is NOT checked). This causes problems with reports because only _DivInc appears for this stock. I want to see both _DivInc and _DivIncTaxFree. Is this possible? Do I need to set up the same security as tax free, with a different name, with the same ticker, and check tax free box? For example, for taxable security name "AT&T" and for non-taxable security name "AT&T Tax Free"

Question 2: Vanguard downloads all reinvested dividend income only as "ReinvDiv". Shouldn't there by two separate transactions, the first transaction "Div" to show the dividend earned, then a second entry "ReinvDiv" to show it was reinvested?

Thanks for any help you can offer.

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Accepted answers

Mark1104

on Q1, what you are asking is not how Quicken is designed.

Again, the purpose of _divinc and DIVINCTAXFREE was to separate what was taxable and not taxable in a world where IRAs were 'small potatoes'. The original design of Quicken goes back to the early 1990's when IRA's were rather small and Roth IRA's didn't even exist. Quicken has never really done much over time to consider the increasing complexity of the tax landscape and is really is not designed to handle tax issues, even what we think i simple by today's standards: income in an IRA versus outside an IRA.

I've used Quicken since 1994 and it's been this way since then if memory serves me correctly.

Thus, unless a bright mind has another solution, a security is either designated a _divInc or _DIVINCTAXFREE and an account is either tax deferred or not. You can't have, let's say, Apple, be both _divinv and _DIVINCTAXFREE at the same time - it's one or the other - as there can only be one AAPL stock ticker in the database.

if you run income / expense reports for the IRA and non-qualified account reports separately, the taxable and non-taxable income will separate in that manner.

Jim_Harman

Just to be clear, the security level "Tax Free" setting controls whether Quicken treats all income from the security as tax free. This should be selected for a muni bond or tax exempt bond fund. Dividend or interest income for these securities is automatically assigned to the _DivIncTaxFree or _IntIncTaxFree Categories.

The "Tax deferred" account setting is for IRAs and similar accounts. Income from taxable securities in these accounts is still recorded as _DivInc or _IntInc but the accounts are excluded by default from Tax reports.

Thus if you hold AAPL a taxable and tax deferred account and include both accounts in your report, all the AAPL income will show as _DivInc. If you exclude the tax deferred account from the report, you will only see the taxable portion of the income.

To see your investing income broken out by taxable/deferred, you might look at the Investment Income report, subtotaled by Investing goal.

All comments

Mark1104

The "DIVINCTAXFREE is really for municipal bonds. it's not meant solely for dividends inside an IRA.

Question 1: do you have both ACCOUNTS set up in Quicken? By ACCOUNTS I mean a taxable account and an IRA account? One ACCOUNT would be checked as taxable and the other one would be marked as tax deferred on the account details screen.

if you do it that way, then while the dividends will show as _DIVINC in both accounts, when you pull a tax report, only the taxable account dividends will appear.

Over my 25 years of using Quicken, the tax environment has become more complex, but I've never believed Quicken was designed to keep track of the ever evolving tax landscape.

Question 2 - no, that is the way to handle it both DIV and REINDIV are income (look at a tax schedule). think of it this way: the dividend occurs (without reinvesting) and then there would a cash entry to buy the security. there is only ONE dividend entry in that case. if there was a DIV and a REINDIV entry there would be double the income - that is just the way Quicken is programed.

TexMike

Thank you Mark1104. On question 1, Both my taxable brokerage account and my IRA Account are set up in Quicken as two separate accounts. The IRA Account Type is marked Tax deferred "Yes". The brokerage account is marked Tax deferred "No". Will setting up a new tax deferred security work as mentioned in my post? I would like to see the two different tax / non-tax dividends on other reports too, such as income/expense comparison, net worth, etc.

Question 2. Thanks for the explanation. I understand better now. I asked this question because I was not sure if it might have been causing the taxable / tax free dividend issue in Question 1.

Mark1104

TexMike

Thanks for your help. I wish Quicken would "get with the times", but I know that is more difficult that one would think with Quicken. Cheers.

Mark1104

Since Quicken was owned by the same company (intuit) that owned Turbo Tax until 3 years ago, I always figured that Intuit put all their money into the tax software and didn't want to put much tax effort into Quicken.

Jim_Harman

Mark1104

@Jim_Harman - well stated.

TexMike

Excellent explanation of the difference between the security level tax free and the account level tax differed. I just cleared the "Tax Free" box on all of my securities. Shwing! As you explained, now only _DivInc appears in my income/expense report. Now when I pull a Schedule B-Interest and Dividends tax report, only taxable dividends are shown as you stated. Unbelievable! I've been using Quicken since the 1990's and now I'm just learning this? I wish Quicken used your answer in its "Help" tutorial. Thank you both Jim and Mark for your guidance!

q_lurker

Different answer(?), I think, with the same effect.

Do I need to set up the same security as tax free, with a different name, with the same ticker, and check tax free box? For example, for taxable security name "AT&T" and for non-taxable security name "AT&T Tax Free"

While that is a possible path, I do not recommend it. In particular, the downloaded data will only associate to one or the other. Stated another way, only one of the two can be matched to an online (brokerage reported) security. All downloaded transactions would connected to either AT&T or AT&T Tax Free. You would then have to edit transactions to reflect the other one. Having two Quicken securities for one real world security is not the way the program is designed, though others have done so with valid reasons.

I would like to see the two different tax / non-tax dividends on other reports too, such as income/expense comparison, net worth, etc.

Income type does not play into Net Worth report.

The Income/Expense by Category report will differentiate _DivInc from _DivIncTaxFree based on the security setting. It will not make a distinction based on the type of account (which seems to be your issue). But that report also defaults to only cash accounts and would not (by default) include investment accounts. If one does include investment accounts, I don't have a problem with that report not differentiating taxation status. For example, realized gains are also totaled without regard to the tax status of the account being included. There is not separation for 'tax-free' realized gains from retirement accounts separate from the 'taxable' gains from regular investment accounts.

I believe all tax reports by default exclude the retirement accounts.

Do you have other specific reports in mind? A broader picture of what you are after might help us point you toward a better report. Off the top, I would say you can get a report on all taxable income (various tax reports). You can also get reports for all income across all accounts. I do not know of a report that will give you all income across all accounts with a definite break between taxable and non-taxable.

rablackwell

I gather almost 6 years later this is still an issue. I have both taxable and non-taxable (ira) accounts holding the same security and would like my cash flow report to show the taxable div income as it is material to my monthly budget. But I do not want my ira div income to show in the same report. I'm gathering from my research that Quicken still does not see this as a real world use case - is that true..?

mshiggins

@rablackwell there has been no change on th QWin side. You might want to pose your question in a QMac category to get a Mac specific answer.

NotACPA

So, use a single security and mark the IRA account as Tax-free/deferred … and then, if needed, simply exclude the IRA account from the monthly budget.

And, your research has led you to an incorrect conclusion.