Original Issue Discount

United States Tax Concept of Original Issue Discount (OID)

When a long-term debt instrument such as a bond or face amount certificate is issued at an original issue price that is lower than its stated redemption value the difference is called Original Issue Discount (OID). The OID is the difference between the principal amount and the issue price. Part of the discount on taxable bonds must be reported as taxable interest income each year that you own the securities. OID is reported on an annual basis as interest income.