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Differentiate between tax exempt int/div and taxable int/div (Reviving an unsolved topic)

OldTimeUser1

Please excuse rehashing this topic. I need an option to select tax exempt int/div versus taxable int/div when I am entering security transactions in brokerage/retirement accounts.

Prior posts suggested coding the security, but the same security can be in both type accounts. Other posts suggested switching to the Tax Report but it only shows partial info. Etc.

I have been using Q for 35 years. Transactions by Categories is my main analytical report (it used to be one of the few Q reports…). Great report for total cash flow review, budget comparison, finding spending trends, ensuring tax deductions, and reminding me the importance of consistent categories.

Any recommendations to get total financial views by categories without commingling tax exempt and taxable transactions into a single int/div category? Thank you all.

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Comments

Boatnmaniac

Coding the security should always only match how the security is coded for the market. It is either tax-exempt or taxable. Nothing in between and we should not be attempting to manipulate that.

Whether or not a security is taxable or tax-exempt in Quicken Classic depends on the tax properties of the security in addition to the tax properties of the account that it is held in.

Tax-exempt securities held in a taxable account: The dividends/interest will be reported by the brokerage (in statements and 1099 tax forms) and captured by Quicken as tax exempt.
Tax-exempt securities held in a tax-exempt account (such as a Roth IRA): Like all securities held in this type of account, whether tax-exempt or taxable, the dividends/interest income will always be reported by the brokerage and captured in Quicken as tax exempt.
Tax-exempt securities held in a tax-deferred account (such as an IRA): Like all securities held in this type of account, the dividends/interest income for tax-exempt securities will be deferred but it will always be reported as taxable normal income (not as dividends/interest) when it is finally distributed from the account. The tax-deferral properties of these types of accounts overrides the tax status of any tax-exempt security.

Any investment advisor worth their salt will always (or almost always) advise to never place tax-exempt securities into a tax-exempt account (like a Roth IRA) or into a tax-deferred account (like an IRA). There simply is no benefit for doing that in part because tax-exempt securities typically have much lower returns than taxable securities meaning it would be a missed growth opportunity for the account. And it is in part because whatever the tax-properties are of the security, it is overridden by the tax properties of the tax-exempt and tax-deferred accounts.

Instead, they will advise to place tax-exempt securities only into taxable investment accounts because it is only with these types of accounts that a tax-exempt security will provide any tax benefit.

So, my advice:

Make sure the security is properly identified as either taxable or tax-exempt only as the issuer of the security has listed it.
Make sure the accounts in Quicken are correctly set up as either taxable, tax-exempt or tax deferred.
Tax-exempt securities should never be bought and held in tax exempt nor tax deferred investment accounts.
Tax-exempt securities should be bought and held only in taxable investment accounts.

I am not aware of the investment reports available to QMac users. Perhaps a QMac user or two will pipe in here and comment on which report(s) might be best suited to help you in your securities performance analysis.

jacobs

I need an option to select tax exempt int/div versus taxable int/div when I am entering security transactions in brokerage/retirement accounts

I actually don't think you do. If you enter a transaction for a security which is tax-free (say a municipal bond fund), you don't need to do anything different because Quicken knows this security is tax-free. If you enter a transaction to any other security, Quicken knows how to report whether the income is taxable or not based on whether the account is tax-free or taxable.

Quicken Mac is designed for you to use the Tax reports if you want to see taxable income, as they default to ignoring accounts without taxable income.

If you want to use the Transactions by Categories report to report on investment income, my suggestion would be to create one report which includes only your taxable accounts and one which includes only your retirement/non-taxable accounts.

I'm not aware of a reason to see investment income for both taxable and non-taxable accounts in one report. But you could create a Schedule D Tax report and Edit > Accounts to include your retirement accounts if you want to see dividends and gains across all accounts.

If there's something you're trying to enter or see in a report which you find you can't do, please reply and explain what it is.

Jon

I use a Transaction By Category report to track spending each month, and I ended up excluding my tax-deferred accounts from the report for exactly this reason. There's no way to get taxable & tax-deferred interest & dividends to consistently appear in different categories, especially within investment accounts where the transaction category is derived from the transaction type.

NotACPA

I hold the stock of my former bank employer in both my taxable and IRA accounts. I use _DivInc to record the dividends in both accounts, and the tax attribute of the IRA takes care of the matter.

No special/new action is needed.

jacobs

@NotACPA said: I hold the stock of my former bank employer in both my taxable and IRA accounts. I use _DivInc to record the dividends in both accounts, and the tax attribute of the IRA takes care of the matter.

Quicken Mac isn't have _DivInc or any visible Categories for investment transactions. The "Type" of the investment transaction is used by the program to know what it is.

But the end result is the same, and we're in agreement that dividend income is dividend income as far as Quicken is concerned, and the type of account determines whether it's taxable or not. And if a specific security has been marked as tax-exempt, then Quicken knows that dividends in that security are not taxable income, irrespective of what type of account it's held in.

OldTimeUser1

Thank you for fast and thorough replies. I haven't thought of Jacobs idea to split my category report into two reports for tax and non-tax accounts. That solves it. I will whine that I don't have every transaction in one single category report, but the retirement accounts' category report should be relatively small. I'll try it with my 2024 data.

For Windows users and to clarify, my issue isn't with securities. It is with categorization of proceeds from those securities. I cannot differentiate taxable or non-tax interest into separate categories so it will be segregated in the Transactions by Category report (same issue for div). For example, when I entered my monthly security transactions, I can only select int or div as the Type, no taxable or non-tax differentiation. As a result, when I run year end Transactions by Category report for analysis, it commingles all int and div paid on securities such as SPY or Fidelity Cash Reserves under the same category, regardless of type of account. So, my taxable account int and divs are mixed with my non-taxable accounts.

Does Windows have securities transaction flexibility to code int or div as taxable or non-tax for categorization purposes - something Mac users could request?