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Since the bonds were not held for five years, the investor forfeits the last three months of interest, amounting to approximately $87.50 if the annual interest rate was 3.50%.
I bonds purchased in October 2022, for instance, would have earned 9.62% for six months and then 6.48% for six months. That’s an average one-year return of about 8.05%.
But Trump and federal legislators have one thing that they will likely act on next year: a renewal of the 2017 Tax Cuts and Jobs Acts, the so-called Trump tax cuts, which are scheduled to expire ...
The rules for calculating the original issue discount utilize a compounding interest formula, with the principal recalculated every six months. Section 1272(a) of the tax code requires that the Original Issue Discount is includible in the lender's taxable income at the end of each tax year, or part of the tax year if the loan was not owned for ...
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This happens because new bonds are issued with higher interest payments, making them more attractive than existing bonds with lower payouts. The opposite tends to happen when interest rates decline.
The interest income is exempt from federal income tax for the recipient—a treatment similar to that for interest income from municipal bonds. Tax anticipation notes are short term notes, issued at a discount, with a maturity period usually less than a year or a stated future date.
Short-term gains from bonds held for less than a year are taxed at your ordinary income tax rate, while long-term gains from bonds held for more than a year are taxed at a lower rate, typically ...