Thanks for coming pack to read Part 3!

Bond Interest

Bonds are a different type of investment than stocks. When you buy a bond in a company, it’s like you’re giving them a loan.

They have to pay you interest each month as part of your agreement. When you make interest on your bonds, it counts as regular income and is taxed at a higher rate than your stock profits.

If you make bond interest, and you’re in the 25 percent income tax bracket, you’ll need to pay 25% on that money.

You can also owe capital gains on the bonds. They’re like a capital asset, such as a stock or a house.

If you bought a bond for $1,000 and sold it for $1,200, you would owe capital gains on the $200 profit.

The same capital gains rules for stocks also apply to bonds. If it’s short term, you owe your income tax rate, and if it’s long term you owe the lower rate.

That’s it for this short but sweet segment! Stay tuned for more next week.