Form 1099-OID reports original issue discount (OID): the gap between a bond's stated redemption price at maturity and its issue price. OID is a form of interest, and you're generally taxed on part of it every year you hold the bond, even though you don't receive that cash until maturity. Issuers and brokers send it when the OID for the year is at least $10.
If you hold zero coupon bonds, long-term CDs or Treasury bonds bought at a discount through a broker, this form is why your tax bill includes 'interest' you never saw. Everything below comes from the IRS instructions for Forms 1099-INT and 1099-OID and Publication 1212.
What OID is, with the IRS's own numbers
OID is the excess of the stated redemption price at maturity over the issue price. There's a de minimis rule: you can treat OID as zero if it's less than 1/4 of 1% of the redemption price multiplied by the number of full years to maturity.
Publication 1212's example, as of October 2026: a 10-year bond with a $1,000 redemption price issued at $980 has $20 of OID. The de minimis limit is $1,000 x 0.0025 x 10 = $25, so the $20 counts as zero. Issue the same bond at $950 and the $50 of OID exceeds $25, so you report part of it every year.
Who gets and who sends Form 1099-OID
A payer must file it for each holder of record whose total daily portions of OID for the year are at least $10. Payers include:
- Issuers of bonds with OID.
- Issuers of CDs with OID and a term of more than 1 year.
- Banks with other OID deposit arrangements over 1 year.
- Brokers and middlemen holding OID obligations as nominees.
- Certain trusts, REMICs and CDO issuers.
It's also filed, even below $10, if foreign tax was withheld on the OID or backup withholding applied. Obligations of 1 year or less go on Form 1099-INT instead, and so does interest on US Savings Bonds.
The boxes that matter
| Box | What it shows |
|---|---|
| 1 | Taxable OID for the part of the year you owned it |
| 2 | Other periodic interest (qualified stated interest) |
| 3 | Early withdrawal penalty, such as from a CD |
| 4 | Federal income tax withheld (backup withholding) |
| 5 | Market discount, if you elected to include it currently |
| 6 | Acquisition premium amortization |
| 8 | OID on US Treasury obligations (kept out of box 1) |
| 10 | Bond premium |
| 11 | Tax-exempt OID |
Box 8 can be negative, for example when an inflation-protected Treasury has a deflation adjustment for the year.
How to report it
- List each payer and the OID and interest from boxes 1, 2 and 8 on Schedule B (Form 1040), line 1.
- If you need to report more or less than the form shows, list the full amount, subtotal, then write 'OID Adjustment' (or 'Nominee Distribution') below and show the change.
- Carry the result to the interest line of Form 1040.
- Increase your cost basis by the OID you include each year, so you're not taxed on it again when you sell.
That last step is where people overpay. Publication 1212's example: Larry bought a bond for $86,235.00, included $1,214.00 of OID over the years, raising his basis to $87,449.00, and sold for $90,000, giving a $2,551.00 capital gain rather than a bigger one. Keep your own basis record alongside the Form 1099-B you get when you sell.
When the number on the form is wrong for you
You may need to refigure the OID if you bought the bond at a premium or acquisition premium, it's a stripped bond or coupon, or it's a contingent payment or inflation-indexed instrument. If you got a 1099-OID in your name that includes someone else's share, you're a nominee and must issue a 1099-OID to the real owner (not needed for your spouse). If you held OID debt and got no form, you still report the OID, using the Publication 1212 methods to work out the figure yourself.
Skipping it isn't free: Publication 1212 warns of a 20% accuracy-related penalty for underpayments due to negligence or substantial understatement. For ordinary bank interest, see our Form 1099-INT guide.
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Why it's called phantom income
The term isn't the IRS's, but it describes the experience: OID builds up inside the bond each year and you're taxed as it accrues, while the cash only arrives at maturity or when you sell. That's why zero coupon bonds suit tax-deferred accounts such as IRAs, and why payers don't send a 1099-OID for an IRA: the IRS instructions list IRAs, Archer MSAs and HSAs among the payees who don't get one.
Brokers can report OID net of acquisition premium, or report the gross OID in box 1 with the premium in box 6. If box 6 has a number, you're the one who has to subtract it.
Finally, compare the form with your brokerage statements before filing. If the issuer and the broker both report the same bond, or the dates you held it look wrong, sort it out with the payer rather than guessing on your return.
The verdict
If a 1099-OID arrives, put the full amount on Schedule B, then check whether you bought at a premium, because that's the most common reason to report less. And keep a running basis record for every OID bond. The tax you pay each year comes back to you as a smaller gain when you sell, but only if you track it. A simple spreadsheet per bond, updated each spring with that year's OID and any premium adjustment, is enough.
Frequently asked questions
What is Form 1099-OID?
An IRS information return reporting original issue discount, the taxable excess of a debt instrument's redemption price over its issue price, plus related interest.
Do you have to pay tax on OID if you didn't receive cash?
Generally yes. You report part of the OID each year you hold the instrument and increase your basis by the amount included.
What is the minimum for Form 1099-OID?
Payers file it when a holder's OID for the year is at least $10, or when foreign tax or backup withholding applies.
Where do I report Form 1099-OID on my tax return?
On Schedule B (Form 1040), line 1, with any OID adjustment shown below a subtotal, then on the interest line of Form 1040.
