What Is “Original Issue Discount”?
06/01/2026
What Is Original Issue Discount (OID)? Original Issue Discount (OID) is a type of interest that occurs when a bond or other debt instrument is sold for less than its face value at the time it is first issued. Instead of receiving regular cash interest payments, the “discount” represents the profit you earn as the
What Is “Organizational cost amortization”?
06/01/2026
What Is Organizational Cost Amortization? Organizational cost amortization is the process of deducting the expenses specifically related to the legal creation of a business entity, such as a corporation or partnership. Instead of writing off these legal and filing fees all at once, the IRS generally requires you to spread the deduction over 180 months
What Is “Ordinary Gain”?
06/01/2026
What Is Ordinary Gain? Ordinary gain is the profit you earn from the sale or exchange of an asset that the IRS taxes at your regular income tax rates. Unlike capital gains, which often benefit from lower tax rates, ordinary gains are treated the same as the wages from your job or the profit from
What Is “Ordinary Dividend”?
06/01/2026
What Is an Ordinary Dividend? An ordinary dividend is a portion of a company’s profits paid out to its shareholders that is taxed at standard income tax rates. Unlike “qualified” dividends, which get a tax break, ordinary dividends are treated the same as the wages from your job or interest from a savings account. 1.
What Is “Nonqualified Stock Option”?
06/01/2026
What Is a Nonqualified Stock Option (NSO)? A Nonqualified Stock Option (NSO) is a type of stock option that does not meet the specific IRS requirements to qualify for special tax-favored treatment. When you use an NSO to buy stock, the difference between the price you pay and the stock’s actual value is taxed as
What Is “Net Investment Income Tax”?
06/01/2026
What Is Net Investment Income Tax (NIIT)? The Net Investment Income Tax (NIIT) is a 3.8% surtax that applies to individuals, estates, and trusts with investment income above certain statutory thresholds. It was introduced as part of the Affordable Care Act to help fund Medicare, though it is often simply viewed as an extra layer
What Is “Mutual Fund Distribution”?
06/01/2026
What Is a Mutual Fund Distribution? A mutual fund distribution is a payment made by a mutual fund to its shareholders, representing their share of the income and profits earned by the fund’s portfolio. These payouts typically consist of dividends, interest, or capital gains realized when the fund manager sells securities at a profit. 1.
What Is “Municipal Bond Interest”?
06/01/2026
What Is Municipal Bond Interest? Municipal bond interest is the money paid to investors who lend funds to state or local governments to support public projects like schools, highways, or bridges. This type of interest is unique because it is generally exempt from federal income tax and, in many cases, state and local taxes as
What Is “Modified Accelerated Cost Recovery System”?
06/01/2026
What Is the Modified Accelerated Cost Recovery System (MACRS)? The Modified Accelerated Cost Recovery System (MACRS) is the current standard method used by the IRS for calculating depreciation deductions on business and investment property. It allows taxpayers to recover the cost of an asset over a set number of years by taking larger tax deductions
What Is “Mid-quarter convention”?
06/01/2026
What Is the Mid-Quarter Convention? The mid-quarter convention is a tax rule that changes how you calculate depreciation if you buy more than 40% of your business equipment during the last three months of the year. Instead of assuming everything was bought mid-year, the IRS requires you to treat each asset as if it were