I'm not familiar with Vanguard, but on Fido I can only enter that on the fixed income page under a CUSIP search.......FWIW
I’m slowly figuring this out
I'm not familiar with Vanguard, but on Fido I can only enter that on the fixed income page under a CUSIP search.......FWIW
This is a great reference, I only learned about these on this site as well. In addition to a step up in safety from corporate bonds, agency bonds are great for tax savings on high local / state taxes.I’m slowly figuring this out
This is a great reference, I only learned about these on this site as well. In addition to a step up in safety from corporate bonds, agency bonds are great for tax savings on high local / state taxes.
https://www.raymondjames.com/wealth...vernment-sponsored-enterprise-debt-securities
I called the bond desk & learned some things. He didn’t know why the bond was trading on the secondary market at a discount even though it is a new issue. There was no settlement date like you’d have with a new issue. Apparently secondary market bonds settle the next day. At least that’s what I got out of it. 6%+ for 3 months beats the money market fund @ 5%. If the fed raises rates that gap will close but it’s looking like the Wall st people are running stocks up on the idea the fed is done raising rates for now. We’re going to find out if they’re right
Yeah I just had another order filled today at $100 via Fido, even though I was easily getting them for $99.75 at ML. I even called Fido Fixed Income Desk and they were very confused saying they could see prices below $100 on their end but there was no way for a normal user to see or buy at those lower prices online (with Fido) since it was a new issue (and goes in at their set "expected" price and is filled separately). They didn't even have a secondary market viewable for these since not issued until tomorrow. Not a big deal but $10, $20, $50 each time over the course of a year as these get called can add up.
All the new, higher coupon agency bonds are sold out at Fido.
If you hold a corporate bond for over a year, a gain from a discount is taxed at your capital gains rate. If it is less than a year, it is treated as ordinary income.
The entire Bogleheads site and two tax accountants have told me that it is ordinary income, except for what the IRS calls nominal interest rate discount related gains. Now of course gains over par are capital gains. This is obviously a very important point so I am confused that I keep getting different answers. I also personally read every page of the IRS publication on the topic and came to the conclusion it’s ordinary income as well.
I think they are confusing municipal bonds being purchased at a deep discount to par where a threshold applies.
I think they are confusing municipal bonds being purchased at a deep discount to par where a threshold applies.
The discount doesn't have to be very deep (.25% per year to maturity) to end up being taxed at ordinary income rates (for municipal bonds only, though, not corporate).
I'm with Echard - it is all really confusing. Here is a reasonably thorough but still understandable explanation. However, I can find nothing on how a bond's de minimus calculation is done with a bond called before maturity.
https://www.msrb.org/sites/default/files/Original-Issue-Discount-Bonds.pdf
"Long-term capital gains apply if you hold the bond for more than one year. Then you can benefit from reduced tax rates, ranging from 0% to 20%, depending on your filing status and total taxable income for the year."
Thanks for your advice Freedom.
Does this mean that we should try to always make longer than 1 year Bond purchases
(if happy with yield)?
It’s just weird that I received so many wrong answers when I tried to confirm this over the last few weeks.
I had a copy of that document in my tax folder from March of this yer. Not sure if it's something I found back then or if you or someone else here posted that link before.-There are nuances to bond taxation. If you want to geek out…
https://s3.amazonaws.com/static.con...ents/990086a6-d87e-46df-bdb4-681554969ee5.pdf
Investors are bracing for a flood of more than $1 trillion of Treasury bills in the wake of the debt-ceiling fight, potentially sparking a new bout of volatility in financial markets.
Some on Wall Street fear that roughly $850 billion in bond issuance that was shelved until a debt-ceiling deal was passed—sales expected between now and the end of September, according to JPMorgan analysts—will overwhelm buyers, jolting markets and raising short-term borrowing costs.