How to handle Tax Free Dividends and Interest (edit)

cbecker

When receiving income from a retirement account I cannot flag it as Tax-Deferred Income and it gets mixed with Taxable Income.

Can we add the TYPE for Tax Deferred or Tax Free Income?

Chris_QPW

What kind of retirement account can have both?

EDIT:

401K/403b/Traditional IRA, you pay tax on everything you withdraw, and not before. The only "sort of exception" is that if you used after tax dollars you can change the cost basis for paying the taxes on those shares, but there isn't any way that this is a clean separation between Tax-Deferred and Taxable, and much more complicated than what Quicken can handle.

Roth 401K/Roth IRA, totally untaxable on the withdraw.

jacobs

If you generate income (dividends, capital gains) in a retirement account, Quicken will not include that income in any of the tax reports; it knows based on the account type that this is not taxable income.

Chris_QPW

Just so it is clear, since someone else didn't understand this in another thread, the way Quicken Windows handles this is if an account is marked tax deferred then Quicken Windows will not include that account by default in any of its tax reports/tax planner. Therefore, not reporting any tax. If you pull up an "expense/transaction" report, you might see it on there because it is just reporting everything. You can also get it on tax reports by changing the default account selection to include the tax deferred accounts, but you shouldn't do that.

When it comes to actually pulling money out of the retirement account and you need to report that as taxable then there are two ways of doing that. You can change the tax line assignment for the transfer out of the account, or you can transfer the gross amount into a taxable account and split out it out into separate categories/tax lines there.

Ps56k2

https://community.quicken.com/discussion/7946123/tax-free-dividends-and-interest

what exactly are you talking about ?
You either already paid taxes on the contributions - and therefore not taxed on withdrawal -
OR - you didn't pay taxes on the contribution - and are now required to pay taxes on the withdrawal
OR - it is a totally exempt type of investment -
IRA RMD - tax deferred - but any withdrawal becomes taxed as Ordinary Income …. (but can be Deductible or Non-Deductible)
Tax Free - again, this is both holding and withdrawal - as in Muni bond funds -

[EDIT] - not really an Idea - more of a clarifying discussion

Jon

Here's a picture of dividends included in my Category Spending report for last month (with the amount column excluded):

I get a combination of dividends in accounts that Quicken knows are tax deferred (the IRAs), dividends in accounts that Quicken knows are not tax deferred (the CMA and Taxable accounts), and dividends in one account that is tax deferred but Quicken thinks it isn't (the HSA, which I perhaps should change to be an IRA type account). They are all getting added together as if they are the same thing. I suspect this is the kind of thing that OP is complaining about. I don't know what you could do about it other than exclude the tax deferred accounts from the report.

(This is not taking into account what the investments are and whether the dividends are non-taxable because of the nature of the investment (like municipal bond funds, for example), but that gets so complicated that I consider it to be outside Quicken's area of responsibility to sort out and I for one would not want to see them try).

jacobs

• If you earn income in a tax-free (Roth) or tax-deferred (IRA, 401k) retirement account, such as dividends or capital gains, that income is not taxable. Quicken will not include it in any tax reports.

• If you earn income in a non-retirement investment account, such as dividends or capital gains, that income is generally taxable. Quicken will include it in tax reports. UNLESS the specific security held is marked as tax-free, such a municipal or government bond funds. If the security is marked as tax-free, Quicken will not include it in tax reports.

• If you pull money out of a tax-free (Roth) retirement account, that is not taxable, and Quicken does not report it as income.

• If you pull money out of a tax-deferred (IRA, 401k) retirement account, that is taxable income. It will appear in a Quicken tax report if the transaction is categorized to a category assigned to a tax line for 1099-R taxable income. In Quicken Mac, the default category for this is Personal Income:Taxable IRA Withdrawal. The problem in Quicken Mac is that you can't have a transaction which is both a transfer from the retirement to non-retirement account and be categorized as taxable income. This currently requires a bit of a hack*, and will hopefully be addressed by the developers at some point. (*Here's the hack I use: in the same transaction in the receiving account which transfers money out of the IRA account, add two more split lines: (1) use Category "Personal Income:Taxable IRA Withdrawal" in the amount of the total RMD withdrawal and(2) use category "Adjustment" for the negative of the same amount. That creates taxable income out of thin air, because the negative adjustment amount does not appear in any report.)

• If you move money from a tax-deferred retirement account to a tax-free retirement account — a Roth conversion — that is taxable income, and needs to be done the same way as an IRA withdrawal described in the paragraph above.

jacobs

@Jon said: I get a combination of dividends in accounts that Quicken knows are tax deferred (the IRAs), dividends in accounts that Quicken knows are not tax deferred (the CMA and Taxable accounts), and one account that is tax deferred but Quicken doesn't know it (the HSA, which I perhaps should change to be an IRA type account). They are all getting added together as if they are the same thing. I suspect this is the kind of thing that OP is complaining about. I don't know what you could do about it other than exclude the IRAs from the report.

Yes, if you use a transaction report rather than a tax report, then dividend income includes income from taxable and retirement accounts — except that dividend income from securities which are coded as tax-free are separated out into a "Dividend Income Tax Free" category on the report. And yes, if you want to see only taxable income, set the report to exclude the retirement accounts. The tax reports are designed to make it easy to avoid needing to monkey with a category report in this way.