interest categories (Q Mac)

pamela77

There are several categories for interest - interest earned, interest income tax free, interest income listed under personal income and interest income as a subcategory of investments and also accrued interest and accrued interest tax free.  I thought I understood that if I used the interest income in an IRA account quicken knew it was tax free ..what would I use the interest income tax free for?  How about interest earned?  
Thank you!

jacobs

Interest income tax free would be for a security in a non-retirement account which is tax free, such as a tax-exempt bond fund. In the settings for each security, there is a check-box available to mark "this security is tax-exempt"; for securities so designated, Quicken will know not to include dividends or capital gains as taxable income.

Note that you don't ever use these categories manually; you just enter or download the investment transactions and Quicken will apply the income to the correct interest category, based on the type of account and type of security.

pamela77

OH, I didn't realize that I wouldn't use them manually.  We have some accounts that quicken doesn't "see" that I have to enter manually.  In those cases, is there a difference between interest income and interest earned?

lhossus

pamela77 said:

OH, I didn't realize that I wouldn't use them manually.  We have some accounts that quicken doesn't "see" that I have to enter manually.  In those cases, is there a difference between interest income and interest earned?

If you look at the Categories list (Quicken menu: Window > Categories) and search for "interest", you will see that the category Interest Income is grouped under Investments, and also marked as Required (Status column). It is one of those categories that Quicken uses for investment transactions - you don't use them yourself.

By contrast, the category Interest Earned is grouped under Personal Income. It may be used to categorize any interest that is not automatically categorized by the Investment logic.

Bonus tip:
If one clicks on a category flagged in the Tax Related column, one can see how the category flows into the tax reports. In particular it can be seen that both Interest Income and Interest Earned flow into tax Schedule B.

jacobs

Building on what @lhossus wrote above, you'll get entries in those two interest categories depending on which type of account earns the interest.

In an investment account, you'd enter a Type = Income>Interest (or Reinvest>Interest) transaction to record interest you received. Quicken will display this in reports using its "Interest Income" category.

On the other hand, if you have a checking account which pays intents, you'd enter a regular banking account deposit transaction using the category "Personal Income:Interest Earned".

When you run a Schedule B tax report, both types of interest payments will appear in the report. So you don't need to worry about there being two types of Interest income categories; Quicken knows how to report them accurately.

pamela77

Thank you, that is really helpful.  Years ago I created my own categories using letters at the beginning of the categories so I could arrange them in an order that made sense. For example I created A: pension income  B: social security C: interest income

If I now go and drag quickens category interest earned up and merge it with C: interest income, will that make it categorize correctly?