Tax: Interest Income: US Government Obligation Interest

Interest from US obligations such as US Treasury bills, notes and bonds issued by any agency or instrumentality of the United States is subject to federal income tax.  Treasury bills generally are short-term issues with maturities not exceeding one year issued at a discount.  Interest on a Treasury bill is the difference between the discounted price you originally paid and the face value you receive at maturity (or what you receive if you sell the bill before maturity).  No interest payments are received during the life of the bill. Treasury notes and bonds have longer maturities and generally pay interest semi-annually.  Refer to IRS Publication 550, Investment Income and Expenses, for further information.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

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