Original Issue Discount (OID) -Form 1099-OID

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. 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.

If the bond was issued before 1985, special rules apply:

  • Bonds issued after May 27, 1969, but before 1985 — If the underlying instrument is a capital asset, add OID to the basis as it accrues each year.
  • Bonds issued before May 28, 1969 — No addition to basis is allowed for OID

The bond issuer will send you a Form 1099-OID. This form shows the amount of OID (Box 1) to include in your income. Sometimes you might need to recalculate the OID. Ex: You bought the bond after the date it was originally issued, and you paid a premium for it.

To learn more, see Publication 1212: Guide to Original Issue Discount (OID) Instruments at www.irs.gov.

Related Topics

Related Resources

I need to amend my return. Is it possible to e-file amended return?

Are you able to e-file your amended tax return online or do you have to mail it to the IRS? Learn more from the tax experts at H&R Block.

Form W-2

Do you need to know how to read Form W-2? Learn more about this wage and tax statement and get tax answers at H&R Block.

I have a question about filing unemployment compensation and social security income tax. When I report my total wages on

When you report your total wages on Form 1040, Line 7, do you include your Social Security income and unemployment? Learn more from the tax experts at H&R Block.

I’m in a business partnership and I got my Schedule K-1 from my business partner. I think he claimed deductions for the

Do you think there's an error on your Schedule K-1? Find out what you need to know. Learn more from the tax experts at H&R Block.