Getting the most out of your investments

Are bond interests taxable?

This depends in a large part on what type of bond you are looking to buy. In a lot of cases, you should be able to find a bond that will not have a taxable interest payment. However, these bonds will also generally have lower interest rates. If you decide to purchase a corporate bond, however, you will definitely have to pay income taxes on the interest payments that you receive from whatever corporation you decide to buy a bond from. The reason for this is that the interest payments that you receive from the corporation do not have any particular tax exempt status, and these payments are part of your yearly income.

Therefore, if you definitely do not want to pay taxes on your investments, and you’re thinking about investing a lot of money, corporate bonds might not be the best choice for you. However, there are other issues that you should consider before you decide whether or not you should buy a bond with taxable interests.

For instance, taxable interest bonds might have higher interest rates than you could expect otherwise. If you decide to pick the right bond, then the amount of money that you get from the interest payments will be enough to make up for the amount spent on taxes.

Likewise, if you’ve found a bond that sounds like a really good deal, you should make sure to check and see whether or not that particular bond’s interest will be taxable. While you might not be able to tell right away (although you should definitely keep in mind that all corporate bonds are taxable), the company or organization that is selling the bonds will be able to tell you whether or not the interest will be taxable.

If you have purchased a corporate bond, you should consider whether or not the tax rate is worth it before you sell the bond before maturity. If you sell the bond after you have owned it for a year, then the tax on your sale will be as high as it can – which is currently at 15%. Therefore, before buying any taxable bonds, you should make sure that you want to keep the bond until it matures – or that you sell it within one year from purchase.