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

What To Do When You Have an Estimated Tax Penalty

Learn more about your options to reduce or remove an IRS estimated tax penalty. Get the facts from the tax experts at H&R Block.

IRS Letter 257C – We Corrected Your Name or Taxpayer Identification Number

The discrepancy between your name and your Taxpayer Identification Number has been corrected. Learn more from the tax experts at H&R Block.

Popular Tax Deductions, Credits & Benefits Included in Tax Cuts and Jobs Act (TCJA)

Can I E-File Under the TCJA? | H&R Block

Can I e file my tax return? Answers for TCJA filing changes and more are addressed by our tax pros here at H&R Block. Visit for more details.