How Are Strip Bonds Taxed

For tax purposes, strip bonds are treated differently from bonds for which interest payments are received. The discount from maturity value is amortized over the period to maturity, and a portion is included in income each year as interest income. Part years are pro-rated.

How are US Treasury notes taxed?

Interest from Treasury bills (T-bills) is subject to federal income taxes but not state or local taxes. The interest income received in a year is recorded on Form 1099-INT. Investors can opt to have up to 50% of their Treasury bills’ interest earnings automatically withheld.

Do you get taxed on U.S. Treasury bonds?

Income from bonds issued by the federal government and its agencies, including Treasury securities, is generally exempt from state and local taxes.