diff --git a/app/helpers/budgets_helper.rb b/app/helpers/budgets_helper.rb
new file mode 100644
index 000000000..8ffb27ad8
--- /dev/null
+++ b/app/helpers/budgets_helper.rb
@@ -0,0 +1,70 @@
+module BudgetsHelper
+  def budget_has_over_budget?(budget)
+    return false unless budget.initialized?
+
+    budget.budget_categories.any?(&:any_over_budget?)
+  end
+
+  def budget_categories_view_state(budget)
+    @budget_categories_view_state ||= {}
+    @budget_categories_view_state[budget.object_id] ||= build_budget_categories_view_state(budget)
+  end
+
+  private
+
+    def build_budget_categories_view_state(budget)
+      uncategorized_budget_category = budget.uncategorized_budget_category
+      all_category_groups = BudgetCategory::Group.for(budget.budget_categories)
+
+      over_budget_groups = if budget.initialized?
+        filtered_groups_for(all_category_groups) { |budget_category| budget_category.any_over_budget? }
+      else
+        []
+      end
+
+      show_over_budget_uncategorized = budget.initialized? && uncategorized_budget_category.any_over_budget?
+      over_budget_count = visible_count_for(over_budget_groups) { |budget_category| budget_category.any_over_budget? }
+      over_budget_count += 1 if show_over_budget_uncategorized
+
+      on_track_groups = if budget.initialized?
+        filtered_groups_for(all_category_groups) { |budget_category| budget_category.visible_on_track? }
+      else
+        all_category_groups
+      end
+
+      show_on_track_uncategorized = all_category_groups.any? && (!budget.initialized? || uncategorized_budget_category.on_track?)
+      on_track_count = visible_count_for(on_track_groups) { |budget_category| parent_visible_for_on_track?(budget, budget_category) }
+      on_track_count += 1 if show_on_track_uncategorized
+      visible_expenses_empty = on_track_count.zero?
+
+      {
+        uncategorized_budget_category: uncategorized_budget_category,
+        visible_expenses_empty: visible_expenses_empty,
+        over_budget_groups: over_budget_groups,
+        show_over_budget_uncategorized: show_over_budget_uncategorized,
+        over_budget_count: over_budget_count,
+        on_track_groups: on_track_groups,
+        show_on_track_uncategorized: show_on_track_uncategorized,
+        on_track_count: on_track_count
+      }
+    end
+
+    def parent_visible_for_on_track?(budget, budget_category)
+      budget.initialized? ? budget_category.visible_on_track? : true
+    end
+
+    def filtered_groups_for(groups)
+      groups.each_with_object([]) do |group, filtered_groups|
+        visible_subcategories = group.budget_subcategories.select { |budget_category| yield(budget_category) }
+        next unless yield(group.budget_category) || visible_subcategories.any?
+
+        filtered_groups << BudgetCategory::Group.new(group.budget_category, visible_subcategories)
+      end
+    end
+
+    def visible_count_for(groups)
+      groups.sum do |group|
+        (yield(group.budget_category) ? 1 : 0) + group.budget_subcategories.count
+      end
+    end
+end
diff --git a/app/javascript/controllers/budget_filter_controller.js b/app/javascript/controllers/budget_filter_controller.js
new file mode 100644
index 000000000..a6337c9fe
--- /dev/null
+++ b/app/javascript/controllers/budget_filter_controller.js
@@ -0,0 +1,57 @@
+import { Controller } from "@hotwired/stimulus";
+
+export default class extends Controller {
+  static targets = ["onTrack", "overBudget", "tab"];
+  static values = { filter: { type: String, default: "all" } };
+
+  connect() {
+    const filterParam = new URLSearchParams(window.location.search).get("filter");
+
+    if (this.#isValidFilter(filterParam) && filterParam !== this.filterValue) {
+      this.filterValue = filterParam;
+    } else if (filterParam && !this.#isValidFilter(filterParam)) {
+      this.#syncFilterParam();
+    }
+  }
+
+  setFilter(event) {
+    this.filterValue = event.params.filter;
+    this.#syncFilterParam();
+  }
+
+  filterValueChanged() {
+    const filter = this.filterValue;
+
+    if (this.hasOnTrackTarget) {
+      this.onTrackTarget.hidden = filter === "over_budget";
+    }
+
+    if (this.hasOverBudgetTarget) {
+      this.overBudgetTarget.hidden = filter === "on_track";
+    }
+
+    this.tabTargets.forEach((tab) => {
+      const isActive = tab.dataset.budgetFilterFilterParam === filter;
+      tab.classList.toggle("bg-container", isActive);
+      tab.classList.toggle("text-primary", isActive);
+      tab.classList.toggle("shadow-sm", isActive);
+      tab.classList.toggle("text-secondary", !isActive);
+    });
+  }
+
+  #isValidFilter(filter) {
+    return ["all", "over_budget", "on_track"].includes(filter);
+  }
+
+  #syncFilterParam() {
+    const url = new URL(window.location.href);
+
+    if (this.filterValue === "all") {
+      url.searchParams.delete("filter");
+    } else {
+      url.searchParams.set("filter", this.filterValue);
+    }
+
+    window.history.replaceState({}, "", url);
+  }
+}
diff --git a/app/models/budget_category.rb b/app/models/budget_category.rb
index 764e3d744..312db666a 100644
--- a/app/models/budget_category.rb
+++ b/app/models/budget_category.rb
@@ -162,6 +162,35 @@ class BudgetCategory < ApplicationRecord
     available_to_spend.negative?
   end
 
+  def budgeted?
+    display_budgeted_spending.to_d.positive?
+  end
+
+  def unbudgeted_with_spending?
+    !budgeted? && actual_spending.to_d.positive?
+  end
+
+  def over_budget_with_budget?
+    budgeted? && over_budget?
+  end
+
+  def on_track?
+    budgeted? && !over_budget?
+  end
+
+  def any_over_budget?
+    unbudgeted_with_spending? || over_budget_with_budget?
+  end
+
+  def visible_on_track?
+    return false unless on_track?
+
+    # Subcategories inheriting parent budget are hidden until they have spending.
+    return true unless subcategory? && inherits_parent_budget?
+
+    actual_spending.to_d.positive?
+  end
+
   def near_limit?
     !over_budget? && percent_of_budget_spent >= 90
   end
diff --git a/app/views/budget_categories/_budget_category.html.erb b/app/views/budget_categories/_budget_category.html.erb
index 8597a1b93..fc93282af 100644
--- a/app/views/budget_categories/_budget_category.html.erb
+++ b/app/views/budget_categories/_budget_category.html.erb
@@ -1,4 +1,4 @@
-<%# locals: (budget_category:) %>
+<%# locals: (budget_category:, show_budget_meta: true) %>
 
 <%= turbo_frame_tag dom_id(budget_category), class: "flex-1 min-w-0 block" do %>
   <%= link_to budget_budget_category_path(budget_category.budget, budget_category), class: "group block w-full px-4 py-2 bg-container", data: { turbo_frame: "drawer" } do %>
@@ -49,7 +49,7 @@
         <div class="h-1.5 bg-container-inset rounded-full overflow-hidden">
           <% bar_color = budget_category.over_budget? ? "bg-red-500" : (budget_category.near_limit? ? "bg-yellow-500" : "bg-green-500") %>
           <div class="h-full <%= bar_color %> rounded-full transition-all duration-500"
-               style="width: <%= budget_category.bar_width_percent %>%"></div>
+            style="inline-size: <%= budget_category.bar_width_percent %>%"></div>
         </div>
       </div>
 
@@ -61,6 +61,7 @@
             <%= format_money(budget_category.actual_spending_money) %>
           </span>
         </div>
+        <% if show_budget_meta %>
         <div class="whitespace-nowrap w-full sm:w-auto inline-flex items-center gap-1">
           <span class="text-sm text-secondary"><%= t("reports.budget_performance.budgeted") %>:</span>
           <span class="font-medium text-primary privacy-sensitive">
@@ -70,6 +71,16 @@
             <span class="inline-flex items-center rounded-full px-2 py-0.5 text-xs font-medium bg-gray-500/5 text-secondary"><%= t("reports.budget_performance.shared") %></span>
           <% end %>
         </div>
+        <% if budget_category.suggested_daily_spending.present? %>
+          <% daily_info = budget_category.suggested_daily_spending %>
+          <div class="w-full sm:w-auto text-xs text-subdued">
+            <%= t("reports.budget_performance.suggested_daily",
+              amount: daily_info[:amount].format,
+              days: daily_info[:days_remaining])
+            %>
+          </div>
+        <% end %>
+        <% end %>
         <div class="whitespace-nowrap w-full sm:w-auto lg:ml-auto">
           <% if budget_category.available_to_spend >= 0 %>
             <span class="text-sm text-secondary"><%= t("reports.budget_performance.remaining") %>:</span>
@@ -85,18 +96,6 @@
         </div>
       </div>
 
-      <%# Suggested Daily Limit (if remaining days in month) %>
-      <% if budget_category.suggested_daily_spending.present? %>
-        <% daily_info = budget_category.suggested_daily_spending %>
-        <div class="py-2">
-          <p class="text-xs text-subdued break-words">
-            <%= t("reports.budget_performance.suggested_daily",
-                  amount: daily_info[:amount].format,
-                  days: daily_info[:days_remaining]) %>
-          </p>
-        </div>
-      <% end %>
-
     <% else %>
       <%# Uninitialized budget - show simple view %>
       <div class="flex items-center gap-3">
diff --git a/app/views/budgets/_budget_categories.html.erb b/app/views/budgets/_budget_categories.html.erb
index 46824bac3..addb349f3 100644
--- a/app/views/budgets/_budget_categories.html.erb
+++ b/app/views/budgets/_budget_categories.html.erb
@@ -1,44 +1,34 @@
 <%# locals: (budget:) %>
 
-<div>
-  <div class="flex items-center gap-1.5 px-4 py-2 text-xs font-medium text-secondary uppercase">
-    <p>Categories</p>
-    <span class="text-subdued">&middot;</span>
-    <p><%= budget.budget_categories.count %></p>
+<% categories_state = budget_categories_view_state(budget) %>
+<% uncategorized_budget_category = categories_state[:uncategorized_budget_category] %>
+<% visible_expenses_empty = categories_state[:visible_expenses_empty] %>
+<% over_budget_groups = categories_state[:over_budget_groups] %>
+<% show_over_budget_uncategorized = categories_state[:show_over_budget_uncategorized] %>
+<% over_budget_count = categories_state[:over_budget_count] %>
+<% on_track_groups = categories_state[:on_track_groups] %>
+<% show_on_track_uncategorized = categories_state[:show_on_track_uncategorized] %>
+<% on_track_count = categories_state[:on_track_count] %>
 
-    <p class="ml-auto">Amount</p>
-  </div>
+<div class="space-y-4">
 
-  <div class="bg-container py-1 shadow-border-xs rounded-md">
-    <% if budget.family.categories.expenses.empty? %>
-      <div class="py-8">
-        <%= render "budget_categories/no_categories" %>
-      </div>
-    <% else %>
-      <% category_groups = BudgetCategory::Group.for(budget.budget_categories) %>
+  <% if over_budget_count.positive? %>
+    <%= render "budgets/category_section",
+      budget: budget,
+      count: over_budget_count,
+      groups: over_budget_groups,
+      uncategorized: uncategorized_budget_category,
+      show_uncategorized: show_over_budget_uncategorized,
+      over_budget_mode: true %>
+  <% end %>
 
-      <% category_groups.each_with_index do |group, index| %>
-        <div class="py-2">
-          <%= render "budget_categories/budget_category", budget_category: group.budget_category %>
+  <%= render "budgets/category_section",
+    budget: budget,
+    count: on_track_count,
+    groups: on_track_groups,
+    uncategorized: uncategorized_budget_category,
+    show_uncategorized: show_on_track_uncategorized,
+    over_budget_mode: false
+  %>
 
-          <div>
-            <% group.budget_subcategories.each do |budget_subcategory| %>
-              <div class="w-full flex items-start">
-                <div class="ml-8 pt-4 flex items-center justify-center text-subdued">
-                  <%= icon "corner-down-right" %>
-                </div>
-
-                <%= render "budget_categories/budget_category", budget_category: budget_subcategory %>
-              </div>
-            <% end %>
-          </div>
-        </div>
-
-        <%= render "shared/ruler" %>
-      <% end %>
-      <div class="py-2">
-        <%= render "budget_categories/budget_category", budget_category: budget.uncategorized_budget_category %>
-      </div>
-    <% end %>
-  </div>
-</div>
+</div>
\ No newline at end of file
diff --git a/app/views/budgets/_category_group.html.erb b/app/views/budgets/_category_group.html.erb
new file mode 100644
index 000000000..7ef0ad347
--- /dev/null
+++ b/app/views/budgets/_category_group.html.erb
@@ -0,0 +1,28 @@
+<%# locals: (group:, parent_visible:, over_budget_mode: false) %>
+
+<% if parent_visible %>
+  <div class="py-2">
+    <%= render "budget_categories/budget_category",
+      budget_category: group.budget_category,
+      show_budget_meta: (over_budget_mode ? group.budget_category.over_budget_with_budget? : true) %>
+  </div>
+<% end %>
+
+<% group.budget_subcategories.each do |budget_subcategory| %>
+  <% if parent_visible %>
+    <div class="py-2 w-full flex items-start">
+      <div class="ml-8 pt-4 flex items-center justify-center text-subdued">
+        <%= icon "corner-down-right" %>
+      </div>
+      <%= render "budget_categories/budget_category",
+        budget_category: budget_subcategory,
+        show_budget_meta: (over_budget_mode ? budget_subcategory.over_budget_with_budget? : true) %>
+    </div>
+  <% else %>
+    <div class="py-2">
+      <%= render "budget_categories/budget_category",
+        budget_category: budget_subcategory,
+        show_budget_meta: (over_budget_mode ? budget_subcategory.over_budget_with_budget? : true) %>
+    </div>
+  <% end %>
+<% end %>
diff --git a/app/views/budgets/_category_section.html.erb b/app/views/budgets/_category_section.html.erb
new file mode 100644
index 000000000..ee6602a3a
--- /dev/null
+++ b/app/views/budgets/_category_section.html.erb
@@ -0,0 +1,56 @@
+<%# locals: (budget:, count:, groups:, uncategorized:, show_uncategorized:, over_budget_mode:) %>
+
+<%# derive display config from over_budget_mode %>
+<%
+  if over_budget_mode
+    target = "overBudget"
+    title = t("budgets.show.over_budget_categories.short_title")
+  else
+    target = "onTrack"
+    title = t("budgets.show.on_track_categories.short_title")
+  end
+%>
+
+<div data-budget-filter-target="<%= target %>">
+
+  <!-- Section Header -->
+  <div class="flex items-center gap-1.5 px-4 py-2 text-xs font-medium text-secondary uppercase">
+    <p><%= title %></p>
+    <span class="text-subdued">&middot;</span>
+    <p><%= count %></p>
+    <p class="ml-auto"><%= t("budgets.show.categories.amount") %></p>
+  </div>
+
+  <!-- Section Body -->
+  <div class="bg-container py-1 shadow-border-xs rounded-md">
+
+    <% groups.each_with_index do |group, index| %>
+
+      <%# derive parent visibility based on mode %>
+      <%
+        parent_visible =
+          if over_budget_mode
+            group.budget_category.any_over_budget?
+          else
+            budget.initialized? ? group.budget_category.visible_on_track? : true
+          end
+      %>
+    <%= render "shared/ruler" unless index == 0 %>
+      <%= render "budgets/category_group",
+        group: group,
+        parent_visible: parent_visible,
+        over_budget_mode: over_budget_mode %>
+
+    <% end %>
+
+    <% if show_uncategorized %>
+      <%= render "shared/ruler" unless groups.size == 0 %>
+      <div class="py-2">
+        <%= render "budget_categories/budget_category",
+          budget_category: uncategorized,
+          show_budget_meta: (over_budget_mode ? uncategorized.over_budget_with_budget? : true) %>
+      </div>
+    <% end %>
+
+  </div>
+</div>
\ No newline at end of file
diff --git a/app/views/budgets/show.html.erb b/app/views/budgets/show.html.erb
index 768cf7727..ce7e21b0b 100644
--- a/app/views/budgets/show.html.erb
+++ b/app/views/budgets/show.html.erb
@@ -47,23 +47,66 @@
     </div>
 
     <%# Bottom Section: Categories full width %>
-    <div class="w-full bg-container rounded-xl shadow-border-xs p-4">
-      <div class="flex items-center justify-between mb-4">
-        <h2 class="text-lg font-medium">Categories</h2>
+    <% has_over_budget = budget_has_over_budget?(@budget) %>
+    <%= content_tag :div,
+      class: "w-full bg-container rounded-xl shadow-border-xs p-4",
+      data: (has_over_budget ? { controller: "budget-filter" } : {}) do %>
+      <div class="flex items-center mb-4 flex-nowrap">
+        <h2 class="text-lg font-medium shrink-0">
+          <%= t("budgets.show.categories.title") %>
+        </h2>
 
-        <% if @budget.initialized? %>
-          <%= render DS::Link.new(
-            text: "Edit",
-            variant: "secondary",
-            icon: "settings-2",
-            href: budget_budget_categories_path(@budget)
-          ) %>
+        <% if has_over_budget %>
+        <div class="flex-1 min-w-0 px-1">
+          <div class="w-full flex justify-center">
+            <div class="max-w-full overflow-x-auto no-scrollbar">
+              <div class="inline-flex whitespace-nowrap bg-container-inset rounded-lg p-1 text-sm font-medium gap-0.5">
+
+                <button
+                  data-action="click->budget-filter#setFilter"
+                  data-budget-filter-filter-param="all"
+                  data-budget-filter-target="tab"
+                  class="px-3 py-1.5 rounded-md transition-colors bg-container text-primary shadow-sm">
+                  <%= t("budgets.show.filter.all") %>
+                </button>
+
+                <button
+                  data-action="click->budget-filter#setFilter"
+                  data-budget-filter-filter-param="over_budget"
+                  data-budget-filter-target="tab"
+                  class="px-3 py-1.5 rounded-md transition-colors text-secondary">
+                  <%= t("budgets.show.filter.over_budget") %>
+                </button>
+
+                <button
+                  data-action="click->budget-filter#setFilter"
+                  data-budget-filter-filter-param="on_track"
+                  data-budget-filter-target="tab"
+                  class="px-3 py-1.5 rounded-md transition-colors text-secondary">
+                  <%= t("budgets.show.filter.on_track") %>
+                </button>
+
+              </div>
+            </div>
+          </div>
+        </div>
         <% end %>
+
+        <div class="<%= has_over_budget ? "shrink-0 flex justify-end whitespace-nowrap" : "ml-auto" %>">
+          <% if @budget.initialized? %>
+            <%= render DS::Link.new(
+              text: t("budgets.show.categories.edit"),
+              variant: "secondary",
+              icon: "settings-2",
+              href: budget_budget_categories_path(@budget)
+            ) %>
+          <% end %>
+        </div>
       </div>
 
       <div class="bg-container-inset rounded-xl p-1">
         <%= render "budgets/budget_categories", budget: @budget %>
       </div>
-    </div>
+    <% end %>
   </div>
 </div>
diff --git a/config/locales/views/budgets/ca.yml b/config/locales/views/budgets/ca.yml
index dd581e49c..6f3d53e3d 100644
--- a/config/locales/views/budgets/ca.yml
+++ b/config/locales/views/budgets/ca.yml
@@ -2,6 +2,20 @@
 ca:
   budgets:
     show:
+      categories:
+        amount: Quantitat
+        edit: Edita
+        title: Categories
+      on_track_categories:
+        short_title: En bon cami
+        title: En bon cami
+      over_budget_categories:
+        short_title: Sobre pressupost
+        title: Sobre pressupost
+      filter:
+        all: Totes
+        on_track: En bon cami
+        over_budget: Sobre pressupost
       tabs:
         actual: Real
         budgeted: Pressupostat
diff --git a/config/locales/views/budgets/de.yml b/config/locales/views/budgets/de.yml
index 00ac0252b..c02980333 100644
--- a/config/locales/views/budgets/de.yml
+++ b/config/locales/views/budgets/de.yml
@@ -5,6 +5,20 @@ de:
       custom_range: "%{start} - %{end_date}"
       month_year: "%{month}"
     show:
+      categories:
+        amount: Betrag
+        edit: Bearbeiten
+        title: Kategorien
+      on_track_categories:
+        short_title: Im Plan
+        title: Im Plan
+      over_budget_categories:
+        short_title: Uber Budget
+        title: Uber Budget
+      filter:
+        all: Alle
+        on_track: Im Plan
+        over_budget: Uber Budget
       tabs:
         actual: Ist
         budgeted: Budgetiert
diff --git a/config/locales/views/budgets/en.yml b/config/locales/views/budgets/en.yml
index c727dc37c..fb06af681 100644
--- a/config/locales/views/budgets/en.yml
+++ b/config/locales/views/budgets/en.yml
@@ -5,6 +5,20 @@ en:
       custom_range: "%{start} - %{end_date}"
       month_year: "%{month}"
     show:
+      categories:
+        amount: Amount
+        edit: Edit
+        title: Categories
+      on_track_categories:
+        short_title: On Track
+        title: On Track
+      over_budget_categories:
+        short_title: Over Budget
+        title: Over Budget
+      filter:
+        all: All
+        on_track: On Track
+        over_budget: Over Budget
       tabs:
         actual: Actual
         budgeted: Budgeted
diff --git a/config/locales/views/budgets/es.yml b/config/locales/views/budgets/es.yml
index 87bc1649b..4f87cff2c 100644
--- a/config/locales/views/budgets/es.yml
+++ b/config/locales/views/budgets/es.yml
@@ -5,6 +5,20 @@ es:
       custom_range: "%{start} - %{end_date}"
       month_year: "%{month}"
     show:
+      categories:
+        amount: Importe
+        edit: Editar
+        title: Categorías
+      on_track_categories:
+        short_title: En camino
+        title: En camino
+      over_budget_categories:
+        short_title: Sobre presupuesto
+        title: Sobre presupuesto
+      filter:
+        all: Todas
+        on_track: En camino
+        over_budget: Sobre presupuesto
       tabs:
         actual: Real
         budgeted: Presupuestado
\ No newline at end of file
diff --git a/config/locales/views/budgets/nl.yml b/config/locales/views/budgets/nl.yml
index f7ba1833d..64265428d 100644
--- a/config/locales/views/budgets/nl.yml
+++ b/config/locales/views/budgets/nl.yml
@@ -1,6 +1,20 @@
 nl:
   budgets:
     show:
+      categories:
+        amount: Bedrag
+        edit: Bewerken
+        title: Categorieën
+      on_track_categories:
+        short_title: Op schema
+        title: Op schema
+      over_budget_categories:
+        short_title: Over budget
+        title: Over budget
+      filter:
+        all: Alles
+        on_track: Op schema
+        over_budget: Over budget
       tabs:
         actual: "Actueel"
         budgeted: "Begroot"
diff --git a/config/locales/views/budgets/zh-CN.yml b/config/locales/views/budgets/zh-CN.yml
index 37115d450..e111d4d91 100644
--- a/config/locales/views/budgets/zh-CN.yml
+++ b/config/locales/views/budgets/zh-CN.yml
@@ -2,6 +2,20 @@
 zh-CN:
   budgets:
     show:
+      categories:
+        amount: 金额
+        edit: 编辑
+        title: 分类
+      on_track_categories:
+        short_title: 正常
+        title: 正常
+      over_budget_categories:
+        short_title: 超预算
+        title: 超预算
+      filter:
+        all: 全部
+        on_track: 正常
+        over_budget: 超预算
       tabs:
         actual: 实际
         budgeted: 预算
diff --git a/config/locales/views/budgets/zh-TW.yml b/config/locales/views/budgets/zh-TW.yml
index e35d802ce..bca3d0cb9 100644
--- a/config/locales/views/budgets/zh-TW.yml
+++ b/config/locales/views/budgets/zh-TW.yml
@@ -2,6 +2,20 @@
 zh-TW:
   budgets:
     show:
+      categories:
+        amount: 金額
+        edit: 編輯
+        title: 分類
+      on_track_categories:
+        short_title: 正常
+        title: 正常
+      over_budget_categories:
+        short_title: 超預算
+        title: 超預算
+      filter:
+        all: 全部
+        on_track: 正常
+        over_budget: 超預算
       tabs:
         actual: 實際
         budgeted: 預算
diff --git a/test/helpers/budgets_helper_test.rb b/test/helpers/budgets_helper_test.rb
new file mode 100644
index 000000000..4c94f627e
--- /dev/null
+++ b/test/helpers/budgets_helper_test.rb
@@ -0,0 +1,107 @@
+require "test_helper"
+
+class BudgetsHelperTest < ActionView::TestCase
+  setup do
+    @family = families(:dylan_family)
+    @budget = budgets(:one)
+
+    @parent_category = Category.create!(
+      name: "Helper Parent #{SecureRandom.hex(4)}",
+      family: @family,
+      color: "#4da568",
+      lucide_icon: "utensils"
+    )
+
+    @child_category = Category.create!(
+      name: "Helper Child #{SecureRandom.hex(4)}",
+      parent: @parent_category,
+      family: @family
+    )
+
+    @parent_budget_category = BudgetCategory.create!(
+      budget: @budget,
+      category: @parent_category,
+      budgeted_spending: 200,
+      currency: "USD"
+    )
+
+    @child_budget_category = BudgetCategory.create!(
+      budget: @budget,
+      category: @child_category,
+      budgeted_spending: 0,
+      currency: "USD"
+    )
+  end
+
+  test "hides inheriting subcategory with no budget and no spending from on-track section" do
+    state = budget_categories_view_state(@budget)
+    group = state[:on_track_groups].find { |g| g.budget_category.id == @parent_budget_category.id }
+
+    assert group.present?
+    assert_empty group.budget_subcategories
+  end
+
+  test "shows inheriting subcategory in on-track section when it has spending" do
+    Entry.create!(
+      account: accounts(:depository),
+      entryable: Transaction.create!(category: @child_category),
+      date: Date.current,
+      name: "Helper Child Spending",
+      amount: 25,
+      currency: "USD"
+    )
+
+    budget = Budget.find(@budget.id)
+    state = budget_categories_view_state(budget)
+    group = state[:on_track_groups].find { |g| g.budget_category.category_id == @parent_category.id }
+
+    assert group.present?
+    assert_includes group.budget_subcategories.map(&:category_id), @child_category.id
+  end
+
+  test "keeps group when only subcategory is over budget" do
+    parent = Category.create!(
+      name: "Helper Group Parent #{SecureRandom.hex(4)}",
+      family: @family,
+      color: "#22c55e",
+      lucide_icon: "utensils"
+    )
+
+    child = Category.create!(
+      name: "Helper Group Child #{SecureRandom.hex(4)}",
+      parent: parent,
+      family: @family
+    )
+
+    BudgetCategory.create!(
+      budget: @budget,
+      category: parent,
+      budgeted_spending: 300,
+      currency: "USD"
+    )
+
+    BudgetCategory.create!(
+      budget: @budget,
+      category: child,
+      budgeted_spending: 50,
+      currency: "USD"
+    )
+
+    Entry.create!(
+      account: accounts(:depository),
+      entryable: Transaction.create!(category: child),
+      date: Date.current,
+      name: "Helper Child Over Budget",
+      amount: 100,
+      currency: "USD"
+    )
+
+    state = budget_categories_view_state(Budget.find(@budget.id))
+    group = state[:over_budget_groups].find { |g| g.budget_category.category_id == parent.id }
+
+    assert group.present?
+    refute group.budget_category.any_over_budget?
+    assert_equal [ child.id ], group.budget_subcategories.map(&:category_id)
+    assert group.budget_subcategories.first.any_over_budget?
+  end
+end
diff --git a/test/models/budget_category_test.rb b/test/models/budget_category_test.rb
index d0f0b71a6..d6408c530 100644
--- a/test/models/budget_category_test.rb
+++ b/test/models/budget_category_test.rb
@@ -169,4 +169,90 @@ class BudgetCategoryTest < ActiveSupport::TestCase
     assert_equal 20, @subcategory_with_limit_bc.reload.budgeted_spending
     assert_equal 50, @subcategory_inheriting_bc.reload.budgeted_spending
   end
+
+  test "budgeted? returns true only when display_budgeted_spending > 0" do
+    @subcategory_with_limit_bc.stubs(:display_budgeted_spending).returns(100)
+    assert @subcategory_with_limit_bc.budgeted?
+
+    @subcategory_with_limit_bc.stubs(:display_budgeted_spending).returns(0)
+    refute @subcategory_with_limit_bc.budgeted?
+
+    @subcategory_with_limit_bc.stubs(:display_budgeted_spending).returns(nil)
+    refute @subcategory_with_limit_bc.budgeted?
+  end
+
+  test "unbudgeted_with_spending? is true only when not budgeted and has spending" do
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(false)
+    @subcategory_with_limit_bc.stubs(:actual_spending).returns(10)
+    assert @subcategory_with_limit_bc.unbudgeted_with_spending?
+
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(true)
+    assert_not @subcategory_with_limit_bc.unbudgeted_with_spending?
+
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(false)
+    @subcategory_with_limit_bc.stubs(:actual_spending).returns(0)
+    assert_not @subcategory_with_limit_bc.unbudgeted_with_spending?
+
+    @subcategory_with_limit_bc.stubs(:actual_spending).returns(nil)
+    assert_not @subcategory_with_limit_bc.unbudgeted_with_spending?
+  end
+
+  test "over_budget_with_budget? requires both budgeted and over_budget" do
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(true)
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(true)
+    assert @subcategory_with_limit_bc.over_budget_with_budget?
+
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(false)
+    assert_not @subcategory_with_limit_bc.over_budget_with_budget?
+
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(false)
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(true)
+    assert_not @subcategory_with_limit_bc.over_budget_with_budget?
+  end
+
+  test "on_track? is true only when budgeted and not over_budget" do
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(true)
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(false)
+    assert @subcategory_with_limit_bc.on_track?
+
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(true)
+    assert_not @subcategory_with_limit_bc.on_track?
+
+    @subcategory_with_limit_bc.stubs(:budgeted?).returns(false)
+    @subcategory_with_limit_bc.stubs(:over_budget?).returns(false)
+    assert_not @subcategory_with_limit_bc.on_track?
+  end
+
+  test "any_over_budget? is true if either condition is true" do
+    @subcategory_with_limit_bc.stubs(:unbudgeted_with_spending?).returns(true)
+    @subcategory_with_limit_bc.stubs(:over_budget_with_budget?).returns(false)
+    assert @subcategory_with_limit_bc.any_over_budget?
+
+    @subcategory_with_limit_bc.stubs(:unbudgeted_with_spending?).returns(false)
+    @subcategory_with_limit_bc.stubs(:over_budget_with_budget?).returns(true)
+    assert @subcategory_with_limit_bc.any_over_budget?
+
+    @subcategory_with_limit_bc.stubs(:unbudgeted_with_spending?).returns(false)
+    @subcategory_with_limit_bc.stubs(:over_budget_with_budget?).returns(false)
+    assert_not @subcategory_with_limit_bc.any_over_budget?
+  end
+
+  test "visible_on_track? behavior for different category types" do
+    # 1. not on_track => always false
+    @subcategory_with_limit_bc.stubs(:on_track?).returns(false)
+    assert_not @subcategory_with_limit_bc.visible_on_track?
+
+    # 2. normal category (not subcategory) => true if on_track
+    @parent_budget_category.stubs(:on_track?).returns(true)
+    assert @parent_budget_category.visible_on_track?
+
+    # 3. subcategory inheriting, no spending => hidden
+    @subcategory_inheriting_bc.stubs(:on_track?).returns(true)
+    @subcategory_inheriting_bc.stubs(:actual_spending).returns(0)
+    assert_not @subcategory_inheriting_bc.visible_on_track?
+
+    # 4. subcategory inheriting, has spending => visible
+    @subcategory_inheriting_bc.stubs(:actual_spending).returns(10)
+    assert @subcategory_inheriting_bc.visible_on_track?
+  end
 end