How do you all handle bank interest in a brokerage account?

tim.rohrer1

My joint brokerage (and IRAs) pay interest on the cash held. It occurred to me that, when analyzing income from investments as I have things structured, these monies are not included because they're categorized under my Income:Interest Income vice Income:Investments:Interest Income.

I tried to recategorize them, but the only subcategory option I'm presented under the category of Investments is ESPP income. In order to use the predefined Income:Interest Income, I'd have to change each type from Payment/Deposit to Interest Income, which isn't quite accurate either since there is no security involved.

I figure I can:

1) Do that anyway, and record them without a security
2) Create another subcategory on Investments, calling it Bank Interest Income (or something similar), thus keeping it separate from checking and savings account interest.
3) Continue to record it with the checking and savings account interest.

What do you all do? I'm leaning towards option 2, but how do you record the interest from cash held in brokerage accounts?

jacobs

I do it differently than @Jon. I enter it as an investment-type transaction for Interest income. Here's an interest payment for my TD Ameritrade account:



When you enter it like this, there's no category to pick; Quicken automatically categorizes it internally. As you can see here, there's no need to specify a security, since the interest earned is for the cash in the account, not a security.

tim.rohrer1

I just discovered that I cannot add any subcategories to Investments So now I'm definitely interested in hearing how others handle this.

Jon

This is what interest transactions look like in my IRA account; other brokerage-type accounts are the same:

It does wind up getting mixed in with taxable interest from savings & checking accounts when I run monthly reports. I sometimes think about creating a separate category under Personal Income for it but haven't bothered to do so yet.

tim.rohrer1

Hey @Jon, Is Interest Earned a top-level category?

With my revelation that I cannot add a subcategory to Investment I'm leaning towards a separate category so I can at least separate them it out from savings & checking interest.

Tom Young

Very occasionally I get Schwab Bank interest in some of my Schwab brokerage Accounts.  I simply created a pseudo security called "Schwab Bank" and use that "security" with an IntInc action when that happens.  That income shows up, correctly, as _IntInc in my Spending reports.  Since that interest is included in the Schwab brokerage account's consolidated 1099 as interest, that interest flows properly to the income tax return.

You don't need to have and "shares' of a pseudo security in an Account in order to record income from that "security."

Jon

tim.rohrer1 said:

Hey @Jon, Is Interest Earned a top-level category?

No, it's a subcategory under Personal Income.

jacobs

I do it differently than @Jon. I enter it as an investment-type transaction for Interest income. Here's an interest payment for my TD Ameritrade account:



When you enter it like this, there's no category to pick; Quicken automatically categorizes it internally. As you can see here, there's no need to specify a security, since the interest earned is for the cash in the account, not a security.

Jon

Unfortunately those interest transactions never seem to download as Interest Income transactions, but rather as Payment/Deposit. I suppose I could change them each month but I never remember to do that.

jacobs

The good thing is that it doesn't matter. I'm entering those transaction manually, so I enter them as Interest Income transactions, but either way will show up on the Tax reports as interest income. 

tim.rohrer1

The funny thing is that I believe I *knew* this! :-) It is interesting though that changing each of these erases the Payee field which seems like a bug.

Back when these accounts were with USAA, transactions were (if I recall correctly) of the type "ReinvestInt" because they went to sweep accounts. Since Schwab doesn't use sweep accounts, they consider (I suspect this is their thinking) them as payments.

Going through and changing the type from "Payment/Deposit" to "Interest Income" should be fairly trivial, although it is annoying to have to do it every month. As @jacobs' approach suggests, there are advantages to manually entering transactions, especially when FIs and Quicken can't seem to get them right.

Thank you for the convo!

tim.rohrer1

> @jacobs said:

> When you enter it like this, there's no category to pick; Quicken automatically categorizes it internally. As you can see here, there's no need to specify a security, since the interest earned is for the cash in the account, not a security.

So an issue though. In my Roth IRAs, Quicken doesn't designate it as Interest Income Tax Free, and so it is shown that way on reports. It does appear the tax form skips it as income, but still it is confusing on a regular category/transaction report.

Am I missing something?

jacobs

Quicken's tax reports know to exclude income (interest, dividends, capital gains) which is earned in retirement accounts, because that income is tax free.

The "Interest Income Tax Free" category is used if you have a security which pays tax-free interest, such as government/municipal bonds or bond funds. You can designate such securities as tax-free on the security's configuration page by checking the "This security is tax-exempt" checkbox.

But if you have a security which is not inherently tax-free, but is held in a retirement account, then you're correct that Quicken reports it as Investments > Interest Income on a Category report. If you want to exclude interest from retirement accounts on such a report, you'd need to edit the report, select Accounts, and de-select your retirement accounts. (That is, you could create a report for taxable income, and a separate report for tax-free or total income, by changing which accounts are included in each report.)

tim.rohrer1

As I thought about this more, the way it is makes sense.

dan.greenberg.ct

Sorry if I'm hijacking this but I think I have a question along the same lines. I let my brokerage interest auto post from the downloads. I noticed that some gets books at Interest Income and some gets booked as •Int Income. I can't merge or move either one but they show up under Interest and Investments respectively. Interest Income shows as required and though •Int Income doesn't, if I try to move it, it says Quicken uses it internally and it can't be moved. Is there any logic as to why there are two separate categories?