logging an tax free interest income transaction

steves70119
steves70119 Member

I am creating a budget. While doing so I wanted to be able to differentiate between interest income that is taxable and interest income that is tax free. I see the default categories has a default "Personal income>Interest Earned" category, but not a "Personal income>Interest Earned>tax free" default category. When I opened the "categories" window (Windows>Categories)i see a "Investments>Interest Income Tax-Free" default category (this category is listed as "required"). But when entering a transaction that would fit that category I find that category is not avaiable in the transaction entering window. Is that because Quicken uses the "Investments>Interest Income Tax-Free" category internally only? Is it automatically used on Interest Income transactions in accounts labeled tax-free. If I have a tax free income transaction that occurs in a non tax free account, do I need to create another "Interest Income Tax Free" category to get that transaction categorixzed appropriately?

Best Answer

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓

    If you earn interest in a tax-free or tax-deferred retirement account, Quicken Mac knows not to include that interest in any tax report on investment earnings.

    If you have a security which is tax-free — such as a tax-exempt bond fund — which you hold in a taxable account, you need to check the "This security is tax-exempt" checkbox on the security set-up page.

    I created a security called "Tax Free Bond Fund" and recorded a $100 Interest transaction for that security. As you can see, Quicken automatically categorizes interest for that security as Investments:Interest Income Tax-Free:

    You shouldn't need to create any new categories.

    Quicken Mac Subscription • Quicken user since 1993

Answers

  • jacobs
    jacobs SuperUser, Mac Beta Beta
    Answer ✓

    If you earn interest in a tax-free or tax-deferred retirement account, Quicken Mac knows not to include that interest in any tax report on investment earnings.

    If you have a security which is tax-free — such as a tax-exempt bond fund — which you hold in a taxable account, you need to check the "This security is tax-exempt" checkbox on the security set-up page.

    I created a security called "Tax Free Bond Fund" and recorded a $100 Interest transaction for that security. As you can see, Quicken automatically categorizes interest for that security as Investments:Interest Income Tax-Free:

    You shouldn't need to create any new categories.

    Quicken Mac Subscription • Quicken user since 1993
  • Jon
    Jon SuperUser, Mac Beta Beta
    edited November 2023

    The "Investments:Interest Income Tax-Free" category is only used when you have an Interest Income transaction in an investment account AND the security paying the interest is marked as a tax-free security (you can do this via the Securities window); Quicken will automatically assign the tax-free interest category for those transactions. If you want to be able to have a regular transaction with a tax-free interest category, you'll need to make your own category; I'd go with "Personal Income: Tax-Free Interest Earned".

    Quicken Mac subscription. Quicken user since 1990.

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