Losses on Bonds May Be Tax Deductible

Did you know that if you have sold a bond, or other fixed interest security at below the price you payed for it the losses you have made may be deductible for income tax purposes?

Likewise if you sell, or it matures, at a higher price you may be liable for tax on the gain.

Talk to your accountant or tax professional to see whether this applies in your situation.

If you think about it, it does make sense. The Yield to Maturity (YTM) is used to help work out the price of a bond. The YTM includes the total income the investor will receive over the life of the bond, including the difference between purchase price and the face value. And of course in New Zealand tax is assessed on income.