Amortizable Bond Premium
 |
Definition of 'Amortizable Bond Premium'A tax term referring to the excess premium paid over and above the face value of a bond. Depending on the type of bond, the premium can be tax deductible and amortized over the life of the bond on a pro-rata basis.A bond premium occurs when the price of the bond has increased in the secondary market due to a drop in market interest rates. |
 |
Investopedia explains 'Amortizable Bond Premium'Those who invest in taxable premium bonds typically benefit from amortizing the premium, because the amount amortized can be used to offset the interest from the bond, which will reduce the amount of taxable income the investor will have to pay with respect to the bond. The cost basis of the taxable bond is reduced by the amount of premium amortized each year.There is no deduction possible for bond premiums related to tax-free bonds. |
Related Definitions
Articles Of Interest
-
How Bond Market Pricing Works
Learn the basic rules that govern how bond prices are determined. -
Get Acquainted With Bond Price/Yield Duo
Understanding this relationship can help an investor in any market. -
What is the difference between amortization and depreciation?
Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally expensed based on the time period over which the asset was ... -
Advanced Bond Concepts
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration. -
Perpetual Bonds: An Overview
A perpetual bond makes interest payments to the investor forever. This type of bond holds a certain appeal to both the issuer and buyer. -
Introduction To STRIPS
STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how. -
The Wonders Of Convertible Bonds
Ever wondered what exactly a convertible bond does? Read the features of a convertible bond and learn how important the conversion factor is to you as an investor. -
All About Zero Coupon Bonds
Zero-coupon bonds are bonds that do not make any interest payments (which investment professionals often refer to as the "coupon") until maturity. For investors, this means that if you make an ... -
Know Your Cost Basis For Bonds
Nobody likes taxes, but tax reporting is an inevitable and unavoidable part of investing. If you buy stock, determining your costs basis is a slightly frustrating but fairly straightforward exercise. ... -
Analyzing The Best Retirement Plans And Investment Options
Understanding the various retirement investments - from annuities to 401(k)s and everything in between - is crucial to reaching your retirement goals. Here, we examined many of the popular investments ...
Free Annual Reports