Mortgage Payments with Escrow and Interest

That setup makes sense on the surface, but nested sub-accounts inherit their parent's account type in QuickBooks. Placing Interest under a Long-Term Liability incorrectly reduces your principal balance instead of tracking it as an expense on your P&L. Similarly, Escrow is money you still own held in trust, making it an Other Current Asset rather than a liability.

Since loan setups can vary, it's always a good idea to consult an accounting professional to make sure everything aligns with your specific financial picture. Now, fixing this requires creating independent accounts in your Chart of Accounts. Here is the recommended structure:

• Mortgage Principal (Long-Term Liability) -- Tracks the actual balance owed on the loan.
• Mortgage Escrow (Other Current Asset) -- Tracks money held in trust for tax and insurance payments.
• Mortgage Interest (Expense) -- Tracks deductible interest paid to the lender.
• Property Taxes (Expense) -- Tracks property tax payments made from escrow.

For your mortgage payment, check out the To make a mortgage payment section of the article for complete, step-by-step instructions: Set up a mortgage in QuickBooks Desktop.

We'll be right here if you have additional questions.