Since tutorials have been provided here, I thought it might be helpful to mention some tax considerations as well. I suspect most of you already know this information, but it might be helpful to some of you. The following only applies to taxable accounts (not retirement accounts).
- Interest on treasuries is NOT taxable for state purposes. On your state tax return there should be a place to subtract interest on treasuries from income. This is true whether the interest is from notes, bills or bonds. Even if it was an ETF, closed end fund or open ended fund. Many mutual funds will provide an amount representing the % age of income obtained from treasuries. Even some stock funds might have a small amount invested in treasuries.
- When you buy treasury bonds (or even corporates) between interest dates, you will have prepaid some interest for the period you didn't own the bond (and consequently not earned the interest). However, the 1099 you receive will have the entire interest (including the prepaid interest). You can subtract any prepaid interest back out on the Schedule B (labled as prepaid interest). Shedule B describes this.
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Tax considerations with treasuries
Moderator: Global Moderator