Interest on the bond may also be exempt from local and state income taxes, which can further lower interest rates (so that they are below comparable taxable debt). Box 12 Bond Premium on U. 00 7- Foreign country or US possession: 6- Foreign tax paid: 0. Click Start or Update next to Interest on 1099-INT. Savers are allowed to buy up to $5,000 of I Bonds directly if they're receiving a tax refund when they file their 2022 tax returns. Interest Income. There are three entries block 7 the description (name), box 11 Tax exempt OID ($3700) and block 6 acquisition premium ($790). Straight line or constant yield. If the bond yields tax-exempt interest, you must amortize the premium. S. Box 14: Tax-exempt and tax credit bond CUSIP. “Vanguard Short-Term Tax-Exempt Bond ETF is built to optimize tax efficiency for investors seeking to. If the state pays the high-income household $100 in interest, the household will see tax savings of $39. Form 8038 may not be filed before the issue date and. (2) Tax-exempt. For taxable bonds, the adjustment will reflect on Schedule B, Part 1. section 1. Commissioner of Revenue. Tax-exempt bond. Ask Your Own Tax Question. U. ” An investor buys a bond at a discount when the dollar price paid is below the stated face value of $100. withholding. 25% of permissible premium). Is the line 8 amount already "adjusted" for the line 13 amount, or is the interest I sh. 22:. 77: Discount: 4%: 2%: $2: $102: $96. In the left-hand navigation, click. Please note tax-exempt income dividends paid by the tax-free ETFs are exempt from Federal Income Tax and will be reported on Form 1099-DIV. Your yield is 8. What are non – taxable bonds? Nontaxable bonds, or municipal bonds, are issued by state and local governments. IF you don't, the accrued interest will be divided up proportionately (and improperly) among boxes 1, 3. 00 Tax-exempt obligations (covered lots) 0. The result is $1,775. You would enter that on Screen 11 under Tax-Exempt Interest on the line for "Amortizable bond premium on tax-exempt bonds". They also won’t incur a capital loss at maturity since the premium. Referenced Sources: Massachusetts General Laws. You are required to report tax-exempt income on Form 1040, and may be required to report it. UltraTax CS TL 31223 Bond premium on Tax-Exempt Bond. The amount of OID tax paid includes that of all previous holders of the bond. 00 5- Investment expenses 0. Except as provided in paragraph (c)(3) of this section, a taxable bond is any bond other than a tax-exempt. itonewbie. Go to Screen 46, Elections. Contrary to one popular misconception, despite amendments to the Excise Tax Act over the years, no changes were made to the surety bond's status as a non‐commercial activity. A premium bond is one in which the market price of the bond is higher than the face value. His amortizable premium is $10 per year. 1099-OID (Rev. Follow these steps to make a manual adjustment for the bond premium you paid on your tax-exempt bonds: Select Federal Taxes; Under Wages & Income select Interest on 1099-INT; Enter your 1099-INT information, select Continue; Select I need to adjust the taxable amount, select Continue; Enter the state that pays your tax-exempt. 00 11- Specified private activity bond interest dividends (AMT) 0. • Line 8: Tax Exempt Interest – Shows the total amount of tax-exempt interest paid to you during the calendar year by the payer. Report the bond’s interest on Schedule B (Form 1040A or 1040), line 1. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Based on the remaining payment schedule of the bond and A's basis in the bond, A's yield is 8. Bonds are still "exempt" from GST/HST and premiums do not include the 5% (or higher in harmonized jurisdictions) tax levy. linduca1216. Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt OID for the year over the amortized acquisition premium for. 03-06-2023, 09:01 PM. Furthermore, he argues that the risk premium. 70 years. 60 (the $100 of interest × the 39. 16 . However, IRC. You must enter the ordinary dividends on box 1a and qualified dividends on box 1b. In Box 110 -. Enter the amount in Amortizable bond premium on tax-exempt bonds. You will receive a copy of IRS Form 1099-INT, Interest Income, for each bond you held that paid interest during the year. The U. Resources for issuers, borrowers and bond professionals. S. Analyze the Fund American Funds Short-Term Tax-Exempt Bond Fund ® Class F-1 having Symbol FSTTX for type mutual-funds and perform research on other mutual funds. According to IRS instructions, if you entered a net amount of interest in Box 3, Box 12 can be left blank. 30% (0% in CA, CT, NY) The income earned in these funds is fully taxable at the federal level. Customer reply replied 3 years ago. Below this subtotal, print “ABP Adjustment,” and the total interest you received. For a tax-exempt covered security acquired at a premium, box 13 shows the amount of bond premium amortization allocable to the interest paid during the tax year. Thus, under § 1. Instead the amortization amount is just showing in the 1099 in the "Adjustments" section, under "Bond premium - Tax-exempt obligations (noncovered lots)", but it. 6045-1(a)(15) to determine if a debt instrument is a covered security. (If the bonds are tax-exempt bonds, any such. The amortization amount taken for federal income tax purposes must be added back on Line 3 of PA-40 Schedule A, Interest Income, while the Pennsylvania amortization amount is. Check it out. 15 . This is an obligation issued by or on behalf of a governmental issuer for which the interest paid is excluded from the holder's gross income under section 103. During the life of the bond, the premium amount is amortized and reduces the amount of t/e interest income received. The investor pays no tax on the income stream from such bonds, but would also be allowed to deduct the premium, offsetting other taxable income. (a). Fidelity Tax-Exempt Money Market Fund (FDEXX) has a seven-day yield of 2. Generally, there will not be a loss. The phase-out threshold is $1,079,800 for 2022 for married filing jointly. Interest derived from bonds issued by California or its political subdivisions, the federal government, the District of Columbia (issued before December 24, 1973), or territories of the United States. The New Jersey return asks what portion is tax exempt (due to federal or New Jersey obligations). The premium paid for a bond represents part of the cost basis of the bond, and so can be tax-deductible, at a rate spread out (amortized) over the bond’s lifespan. The tax rules in each of these situations can be fairly elaborate and often require an investor to make elections and keep detailed records on the bond. (2) Tax-exempt bonds. The interest payments on the bond are qualified stated interest. In box 11, Bond Premium, put the amount. Form 8038-CP - Availability of Electronic Filing; Mandatory Electronic Filing for Certain Filers in 2024. tax-exempt bond, report an additional $128. 1. 6%, and that marginal tax rate is significantly positively related to the returns in the stock and bond markets. 00 Bond premium- Tax-exempt obligations (AMT, noncovered lots) 0. The fund has an expense ratio of 0. S Treasury Obligations. Bond premium $ 11. Understanding the tax implications of your bond investments is crucial for effective. California does not tax: Interest on governmental obligations. You are required to report tax-exempt income on Form 1040, and may be required to report it. What should I enter in the Type Code field in the interest and dividends statements? How do I enter income from a private activity bond? However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). Enter the state that pays your tax-exempt. In the case of a tax-exempt obligation, if the bond premium allocable to an accrual period exceeds the qualified stated interest al-locable to the accrual period, the ex-cess is a nondeductible loss. 00 10- Exempt-interest dividends (includes line 11) 0. Actually, there is not a deduction for the premium you paid for your tax-exempt bonds on your federal return. At least, that's how it's handled for tax-exempt Muni Bonds. What should I do with this?(Amortized Bond Premium). Subtract the bond premium amortization from your interest income from these bonds. Refer to the screenshots below. A California bond is federal tax-free, so on his federal return, the taxpayer reports $40 in tax-free interest ($50 minus $10 in amortizable premium) and reduces his basis in the bond from $1,100 to $1,090 in the first year. Follow these steps to make a manual adjustment for the bond premium you paid on your tax-exempt and taxable bonds: Select Federal Taxes Under Wages &. See Regulations section 1. Amortization Methods for Premium Bonds. Under applicable tax rules, the Issuer is legally responsible for the tax-exempt status of the bonds. 6045-1(a)(15)(i)(C) to determine if a debt instrument is a covered security. (1) The amount of any bond premium shall be allocated among the interest payments on the bond under rules similar to the rules of subdivision (c) of Section 24361. At least 75% of the securities held by the fund are municipal bonds in the top three credit-rating categories as determined by a nationally. 6251 (which most people won't care these days). Min. C has not previously elected to amortize bond premium, but does so for 2002. The Net expense ratio is the Gross expense ratio minus any reimbursement from the Advisor. Below this subtotal, print “ABP Adjustment,” and the total interest you received. Report the bond’s interest on Schedule B (Form 1040A or 1040), line 1. The second de minimis rule is the De Minimis Market Discount Rule, which only indirectly applies to OID bonds, but has significant effects, particularlyReporting interest and bond premium. For purposes of the restrictions against federal guarantees of tax-exempt bonds under § 149(b), a Build America Bond is not treated as federally guaranteed by reason of the credit allowed under § 54AA(a) or § 6431. In Box 85 - Bond premium on tax-exempt bond, enter the amount of bond premium related to the federal tax-exempt interest. The correct value can be obtained by splitting the entries between two 1099-INT forms, entering the values for bond premium on one and the accrued interest adjustment on the other. Vanguard today launched the Vanguard Short-Term Tax-Exempt Bond ETF (NYSE Arca: VTES). Follow these steps to make a manual adjustment for the bond premium you paid on your tax-exempt and taxable bonds: Select Federal Taxes. 06 and bond premium is $1. Municipal bonds have a face value. 15% of the average daily net assets for the Fund until April 30, 2024. However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Tax-exempt (for municipal bonds) Adjusted. Under Wages & Income select Interest on 1099-INT. all tax-exempt interest income received during the tax year should be reported on Form IT-201, Line 21a "Exempt-interest dividends" of the New York State income tax return, regardless of whether it is exempt from New York State and local income taxes or not. (ii) Tax-exempt obligations. However, OID bonds purchased in a. 1099-INT (Rev. *** This is important tax information and is being furnished to the Internal Revenue Service. 06 and bond premium is $1. 171–1, the amount of bond premium is $10,000 ($110,000−$100,000). The amounts from box 6 and 7 are used to generate a Foreign Tax Credit. Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a (that is, the excess of tax-exempt OID for the year over the amortized acquisition premium for the year). However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). See the Instructions for Form 6251. It is a municipal bond that matured and the premium was more than tax exempt amount. to you on Form 1099 each year since you bought the bond. tax-exempt bonds. See § 6. (March 27, 2023) As part of ongoing efforts to improve service for the tax-advantaged bond community, the IRS accepts electronic filing of Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. 00 Market discount (noncovered lots) 0. If you disposed of the obligation or acquired it from another. read moreor qualified private activity bonds, such as qualified 501(c)(3) bonds. One section of the tax rules pertaining to hedge bonds provides that to avoid a bond becoming a hedge bond, an issuer must. I have a form 1099-INT that lists tax exempt interest on line 8 and bond premium on tax exempt bonds on line 13. read more 1 Solution. However, each. Client has 1099-Int and within the paperwork there is an amount for "Noncovered Bond Premium on Tax-Exempt Bond" and an amount for Welcome back! Ask questions, get answers, and join our large community of tax professionals. Consolidated 1099 When tax exempt interest is partially taxable to the state, do the following: Go to Income > Consolidated 1099Tax exempt interest is entered in State Tax-exempt interest (U. It should show 6,000 = 10,000 - 2,000 - 2,000. That loss can be taken at maturity or it can be spread out over the life of the bond. Box 13 – 15. 22-Sep-2019 6:06am. Is the line 8 amount already "adjusted" for the line 13 amount, or is the interest I sh. Client has CA muni bond with tax exempt interest but also a bond premium reported in box 13. 05%. If the bond yields tax-exempt interest, the taxpayer must amortize the premium. However, in conduit financings, the bond documents usually delegate most responsibilities to maintain the tax-exempt status of the bonds to the Borrower. See the Instructions for Form 6251, Alternative Minimum Tax for Individuals. Therefore, the OID on tax-exempt bonds is tax free, while the OID on taxable securities is subject to taxation as interest income. bond that is treated as tax-exempt interest to the discount that produces a yield to maturity equal to the coupon rate of interest on (or, at the purchaser’s election, the original yield to maturity of) the whole tax-exempt bond. The following includes answers to common questions about interest, dividends, and tax-exempt income. Back to Table of ContentsThis article will help you input 1099-INT amounts into Lacerte. For a tax-exempt covered security acquired at a premium, see Box 13. For federal tax purposes, the individual won’t pay taxes on the interest. Bond premium- Tax-exempt obligations (noncovered lots) 0. Reporting bond premium amortization for noncovered tax-exempt municipal bonds. (C) Carryforward in holder's final accrual period —( 1) If there is a bond premium carryforward determined under § 1. State tax withheld $ $ Form . Box 6 - Acquisition premium. Treasury Obligations shows the bond premium for the year for covered U. 67. 00 Reporting Premium Municipal Bond Taxes. ”. IRC § 103 does not mention governmental bonds, but it does refer to. For more information, visit the community discussion for 1099-OID Box 6 and Box 11. 1272-2(a):To report this on your tax return, you can follow these steps: Enter the Tax Exempt OID ($3700) on Form 1040, Line 2a as tax-exempt interest. Box 12 Bond Premium on U. For this purpose, a bond can be in any form of indebtedness under federal tax law, including a bond, note, loan, or lease-purchase agreement. Therefore, the sum of all amounts payable on the bond (other than the interest payments) is $100,000. Calculation. Credit Quality / Interest Rate Sensitivity —. For tax-free municipal bonds, the interest is reported separately in a box labeled “Tax-exempt interest. Bond premium $ 12 . C. Reporting interest and bond premium. According to IRS regulations, any amount reported in Box 12 of Form 1099-DIV is to be treated as "Tax-Exempt Interest Income. Tax-exempt bonds can trade at a significant discount to par when interest rates are high. NUVEEN INSD TAX-FREE ADVANTAGE MUN FD 1. Specified private activity bond interest $ 10 . In Box 88 - State, enter XX. To properly enter this and resolve the diagnostic, net the amount of Municipal Bond interest by subtracting $100 from the $500 total and entering $400 in the applicable Municipal bond input field. 64 years. To. bonds will be offered and traded at a “discount. 07. Because the interest payments on the debt instrument are qualified stated interest, the stated redemption price at maturity of the debt instrument is $100,000. To enter the Tax-exempt interest and Specified private activity bond interest in Turbo Tax: In Federal, jump to 1099-Div and click add. 171–1, the amount of bond premium is $10,000 ($110,000−$100,000). The IRS says: "For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. If a regu-lated investment company (RIC) within the meaning of section 851 has excess bond premium for an accrual periodThis amortized amount is not deductible in determining taxable income [*]. Bond issue. California Code, Revenue and Taxation Code - RTC § 24363. In the case of a bond (other than a bond the interest on which is excludable from gross income), the amount of the amortizable bond premium for the taxable year shall be allowed as a deduction. This is the upper limit for the deduction of distributions made to. I net purchased accrued interest (purchased interest) and box 13 on 1099 INT (Bond Premium on TEB) against total Tax Exempt Interest (Box 8 on 1099 INT). 74 years, while the duration of the 3% premium bond would be 4. The TurboTax community is the source for answers to all your questions on a range of taxes and other financial topics. From the left of the screen, select Income and choose Interest Income (1099-INT, 1099-OID) . How do you record bond premium on tax-exempt bonds? If the bond is a tax-exempt municipal, you report the loss of premium value and subtract the loss from. 1099-INT. Fund size: $31 billion. I can't do a manual adjustment as I'm doing a standard deduction, not itemized deduction. However, each year you must reduce your basis in the bond (and t ax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year using the constant yield method. Panama Canal Zone Bonds (exempt under 31 U. municipal bonds from federal income tax. A separate clarification, I net purchased accrued interest (purchased interest) and box 13 on 1099 INT (Bond Premium on TEB) against total Tax Exempt Interest (Box 8 on 1099 INT). Municipal bonds. The 2017 tax law increased the phase-out thresholds for AMT meaning fewer filers will be subject to AMT under the new tax laws. 9. The difference between these two amounts is the OID. Other Information. Under § 1. That percentage varies from year to year. What if I have income from obligationsAn individual who received $421 in interest from bonds issued by another state and purchased after December 31, 2011, will have to “add back” $421 to the amount of income used to calculate the tax obligation for Indiana. You have it backwards unfortunately. A bond sold at par has its coupon rate equal to the prevailing interest rate in the economy. 113–295, § 221(a)(29)(A), amended subpar. Market discount on a tax-exempt bond is not tax exempt. See the Instructions for Form 6251, Alternative Minimum Tax for Individuals. read more Box 8 is showing the gross / total interest I received on these bonds, but there is nothing showing in other boxes (including box 13), even though I bought these bonds at a premium. The bond pays out interest, but loses $368 of value during the holding period. See line 4. This article explains how to input an election to amortize bond premium on Form 1099-INT, line 11. Therefore, the OID on tax-exempt bonds is tax free, while the OID on taxable securities is subject to taxation as interest income. If adjustments for bond premiums are not reflected on your 1099-INT, you can manually enter the bond premium adjustment in the 1099-INT section of TurboTax. 1 A closing binder and/or CD or other electronic copy of relevant and customary transaction documents is saved and stored properly. This premium is due to the fact that the bond is paying a higher interest rate than the stated rate for similar bonds. Tax Topic 403 - Interest Received. Municipal bonds have a face value. Box 12 of the Form 1099-DIV shows your tax-exempt income dividends. We then subtract this amount from $5,000 which is the amount of coupon earned for 1 year. I have $398 in total Specified Private Activity Bond Interest Dividends (Box 13 in 1099-DIV) across my investments. Under § 1. 171–2, if a bond premium election were in effect for the prior taxable years, C would have amortized $3,257. Fiduciary bond premiums; Legal publication costs of notices to creditors or heirs;. Specified Private Activity Bond Interest — Shows tax-exempt interest subject to the alternative minimum tax. §1. how do I report these in Federal Tax?. Premium: 4%: 6%: $6: $106: $103. Marietta City Hall. Submitted by David Ch on 05-04-2021 03:18 PM. Note that unless her tax situation. Specified private activity bond interest $ 10 . 000% Dated Date: 8/31/20 Maturity Date: 4/01/27 Issue Yield/Price: 0. You can delete Schedule B using these steps: Select Tax Tools from the menu on the left. (iii) Bond premium allocable to the first accrual period. Currently our investments are 33% in tax deferred accounts, 5% in Roths and >60% in taxable accounts. (b)(1)(B). A holder may elect to amortize bond premium on a taxable bond. The Vanguard Municipal Money Market Fund (VMSXX) has a seven-day yield of. As of November 13, 2023, the fund has assets totaling almost $16. A copy of Form 1099-OID will be sent to the IRS. In the case of a tax-exempt obligation, if the bond premium allocable to an accrual period exceeds the qualified stated interest al-locable to the accrual period, the ex-cess is a nondeductible loss. To report the amortized bond premium by: Login to Turbo Tax; Jump to Income and Expenses. For each year that the premium is amortized, Janice’s cost basis (the $1,030) is reduced by the annual $10 amortization under IRC § 1016 (a) (5) and reflected by the broker as well under Treas. However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line. To determine the bond premium amortization we multiply the acquisition cost times the purchase yield ($107,485)* (. Vanguard, one of the world’s largest asset managers, bolstered its exchange traded fund lineup with the addition of the Vanguard Short-Term Tax-Exempt Bond ETF (VTES). • Although there is a box for. Form 1099-OID, Original Issue Discount, exists to report income when bonds, notes, or certificates of deposit (CDs) are sold at a discount from their maturity value. ("Related" includes companies that are owned by a majority interest. Bond premiums on tax exempt are not adjusted at the federal level. 52 in 2009. Municipal bonds ETFs are generally free from federal and state taxes if they hold only tax-exempt bonds. Review resources for tax-exempt bond holders in IRS publications. Options. When the bond matures, the. The IRS is interested in preventing issuers from “hedging” against the risk that interest rates will rise, and therefore issuing more bonds than necessary (overburdening the tax-exempt bond market). Premium reduces your OID. Premium Bond: A premium bond is a bond trading above its par value ; a bond trades at a premium when it offers a coupon rate higher than prevailing interest rates. Edward Jones does keep track of. Inside addition, New Sweatshirt Problems about New IRS Bond Premium Amortization Rules ' s instructions intimate such amortizable premiums are excluded for that state ' sec mandatory add-back by statement, “When you total your interest income on Lines 15a and 15b, the amount must correspond the total of taxable and tax-exempt. What should I do with this? A muni bond was also sold, 1099-B reports same amount as cost basis $10,000 and sales price of $10,000. Here are seven of the best tax-free municipal bond funds to buy in 2023: Fund. S Treasury securities. 744 & 745) E E Production Credit Associations E E Puerto Rico E E Puerto Rico Water Resources — 4. Once information is completed, Lacerte generates an election statement with the election language and bond information. Capital Group veteran municipal manager Chad Rach will transition out of American Funds Tax-Exempt Bond on Oct. Gen. 00 13-Bond premium on tax-exempt bonds (categorized below) 0. read more03-06-2023, 09:01 PM. Tax-exempt income. The optional redemption provision allows the government issuer to refinance the outstanding bonds with refunding bonds. For example, consider that an investor purchases a bond for $1,050. Though interest on these bonds is taxable, they often offer higher. However, in the case of a taxable bond, if you have been How to report acquisition premium on tax exempt bonds. In TaxSlayer Pro, tax-exempt interest and dividend income can be entered from two different menus within Form 1041. Taxable OID, tax-exempt OID and bond premium are reported on Form 1099-OID. Tax Law § 612(b)(1), modifications increasing federal adjusted gross income include interest income on obligations of any state other. Learn more about mutual funds at fidelity. Box 4 - Federal income tax withheld. If the Tax-exempt income is coming from a Passthrough it is entered in Passthrough K-1's, Screen 23. UltraTax CS TL 32075 Form Field Name Not Shared . Treasury obligation and is exempt from state and local income taxes. If adjustments for bond premiums are not reflected on your 1099-INT, you can manually enter the bond premium adjustment in the 1099-INT section of TurboTax. There are 3 NYS bonds. T. From a tax standpoint, life would be much simpler if all bonds were pur-chased at their par value. I have a form 1099-INT that lists tax exempt interest on line 8 and bond premium on tax exempt bonds on line 13. 6%. Scroll down to the Tax-exempt interest subsection. 2 of Notice 2010. • Qualified 501(c)(3) bonds. Note that the tax on OID is paid annually, but the value is needed to determine your basis and the amount of market discount. Vanguard Style View: Muni National ShortA judge for the New York Division of Tax Appeals rejected the couple's arguments that New York's conformity to the federal code requires interest income from federally tax-exempt bonds issued by. 3 [a] of this Part). In addition, the rules vary depending on the issuer of the bond (taxable bonds vs. I also have the same issue with my 1099-INT where my bond premium (box 11) is greater than interest income (box 1). If your combined income is less than $34,000 for individuals and $44,000 for couples filing jointly, up to 50%. Issued on or before 9/27/85. That process includes extensive fact-gathering and analysis by bond counsel to ensure that the bonds will be in compliance with federal tax law requirements. 25%. So if you did report it, it would be on Schedule B (which the Sch B totals carry over to the front page of the 1040). Under § 1. 1. 50% would drop to roughly 2. To. This nondeductibility (and accompanying adjustment to basis) for tax-exempt bond premiums became Federal law in 1942. 02-17-2020 09:00 AM. Prior to amendment, subpar. The discount is also amortized and increases the amount of t/e. 17 . Because discount bonds are sold below face value, it is expected. The TIC for the most recent tax-exempt bond sale on June 8, 2022, was. I think you meant Box 13 on 1099-INT. tax-exempt bonds and, if a tax-exempt OID bond purchased at the issue price in the initial offering is held to maturity, any OID associated with the bond would be treated as tax-exempt interest. The amortization is calculated by: First, calculate the bond premium by subtracting the face value of the bond from what you paid for it. Fidelity Learn. So, for example, if your Acq.