Gross Income - Section - Interest Income
4 important questions on Gross Income - Section - Interest Income
What types of interest income are considered taxable?
- Interest from federal, industrial development and corporate bonds.
- Part of the proceeds from an installment sale
- Interest paid by the federal or state government for late payment of a tax refund
- The amortization of a bond premium may offset the reportable interest received and reduce to the bond's basis, and the amortization of a bond discount may add to the reportable interest received and add to the bond's basis.
What is the tax status of interest on state and local government bonds/obligations?
- Interest on state and local bonds/obligations is tax-exempt.
- Mutual fund dividends for funds invested in tax-free bonds are tax-exempt.
Under what conditions is interest on U.S. Series EE savings bonds tax-exempt?
- It is used to pay for higher education of the taxpayer, spouse, or dependents
- The taxpayer is over age 24 when bond is issued;
- A married taxpayer files a joint return;
- The taxpayer meets certain income requirements.
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How is forfeited interest treated for tax purposes?
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