What is a municipal OID?

What is a municipal OID?

Bonds issued at a price below par value are original issue discount or “OID” bonds. The original discount on a municipal OID bond is accrued over the life of the bond—even though no income is reported or taxes paid—for the purpose of determining gain or loss if the bond is sold prior to maturity.

Is OID on municipal bonds taxable?

OID represents interest paid by the issuer and, for municipals, is generally treated as taxexempt interest. For tax-exempt municipal OID bonds, this income is not subject to the ordinary income tax, although it is required to be reported for informational purposes in the same manner as other tax-exempt bond interest.

What is OID interest income?

Original issue discount (OID) is a form of interest on a debt instrument such as a bond or note issued at less than its face amount. The discount is considered additional interest income. A debt instrument generally has OID when the instrument is issued for a price less than its stated redemption price at maturity.

How do I report OID income?

For a specified private activity bond with OID, report the tax-exempt OID in box 11 on Form 1099-OID, and the tax-exempt stated interest in boxes 8 and 9 on Form 1099-INT. Exceptions to reporting. No Form 1099-INT must be filed for payments made to exempt recipients or for interest excluded from reporting.

What is OID for tax purposes?

Original issue discount (OID) is a form of interest. It usually occurs when companies issue bonds at a price less than their redemption value at maturity. It’s taxable as it accrues over the term of the bond. You also get to increase your basis in the bond by the amount of OID included in income.

Is tax-exempt original issue discount taxable?

Form 1099-OID: Original Issue Discount, is the IRS form that you received if you must include an amount of OID in your taxable income. Original Issue Discount refers to the excess of an obligation’s stated redemption price at maturity over its issue price, and it is taxable as interest over the life of the obligation.

Is OID taxable income?

Original issue discount (OID) is a form of interest. For bonds issued after 1984, the OID is treated as interest. It’s taxable as it accrues over the term of the bond. You also get to increase your basis in the bond by the amount of OID included in income.

Is OID the same as interest?

Original issue discount (OID) is a form of interest. It usually occurs when companies issue bonds at a price less than their redemption value at maturity. The difference between these two amounts is the OID. For bonds issued after 1984, the OID is treated as interest.

Where do I report OID interest on 1040?

This amount reduces taxable interest and is notated “ABP Adjustment” on Schedule B. Box 11 Tax-exempt OID is generally reported as tax-exempt interest on Form 1040.

How do I report a 1099-OID on my taxes?

To report the 1099-OID, go to:

  1. Federal Section.
  2. Income – Select My Forms.
  3. 1099-DIV,INT,OID – Interest Income, Dividends, and Distributions.
  4. Interest or Dividend Income.
  5. Add Interest and Dividends.
  6. Original Issue Discount, Form 1099-OID.

How is OID taxed?

For bonds issued after 1984, the OID is treated as interest. It’s taxable as it accrues over the term of the bond. You also get to increase your basis in the bond by the amount of OID included in income. This reduces your capital gain — or increases your loss — when you sell it.

How is the OID reported on an income tax return?

Additional information on the form includes the OID on a taxable obligation for the part of the year you owned it. You report this as interest income on your income tax return. The amount you report may depend on the type of debt instrument, the issue or acquisition date, and other factors.

Do you have to pay taxes on OID bonds?

The OID may not offset rates offered by traditional fixed-rate bonds. Investors could face an annual tax liability before the bond matures. It’s important for investors to contact a tax professional or review the IRS tax code before investing in bonds that are considered original issue discounts.

What does OID stand for in bond market?

The OID is the difference between the price paid for a bond and its face value. The OID may be considered interest since the buyer is paid the face value of the bond at maturity even though the purchase price was lower than the face value.

What kind of securities are eligible for OID?

OID rules may apply to certificates of deposit, time deposits, bonus savings plans, and other deposit arrangements, especially if the payment of interest is deferred until maturity. The rules apply also to Treasury inflation-protected securities .