How is accrued interest handled on my taxes?

Accrued interest you pay as a buyer and accrued interest you receive as a seller are reported in specific ways. Ask a tax professional how they apply to your return.

Do I pay accrued interest when I buy shares of a bond ETF?

Shares of an ETF trade and settle like stock, so the confirmation shows a share price with no separate accrued interest line.

Why is my figure off from the confirmation by a day's interest?

Check that you counted to the settlement date and excluded it, and that you used the bond's own day count. A Treasury follows a different basis from the 30/360 method used for corporate and municipal bonds.

Bond Accrued Interest: How Settlement Sets the Amount

Accrued interest is the interest a bond has built up since it last paid a coupon. Buy a bond between coupon dates and you pay the seller that amount on top of the price, then collect the whole next coupon yourself. The settlement date sets the size of the charge. Under FINRA Rule 11620, interest on a regular-way trade is counted to the T+1 settlement date, with that date itself left out. Move the settlement date and the accrued interest moves with it.

The rule that fixes the end date

FINRA Rule 11620 sits in the Uniform Practice Code, under computation of interest. For interest-paying securities settled on a non-cash basis, it computes interest through the day before the first business day following the date of the transaction, leaving that business day itself out. That day is the regular-way settlement date. T+1, in other words.

Cash trades differ. On a trade settled the same day, the count stops short of the trade date itself.

Corporate and municipal bonds settle T+1 regular way. Treasuries settle the next business day by market convention. Same day, different source.

So the count has two ends. It starts on the last coupon payment date and stops the day before settlement.

The 30/360 day count

Rule 11620 uses a 360-day year. Each month is one twelfth of it. That makes every month 30 days long, whatever the calendar says, so a span from the 1st to the 31st of the same month counts as 30 days, and a trader who counts real days on a calendar will drift away from the figure on the confirmation as soon as a 31-day month falls inside the span.

Municipal securities get the same basis from MSRB Rule G-33. It writes the count as a formula.

Treasuries are the exception. They follow their own day count. The trade confirmation shows the accrued interest charged.

A corporate bond, worked through

Every figure here is hypothetical.

Take a corporate bond with 10,000 of face value and a 5% annual coupon, paid semiannually on March 15 and September 15, whose last coupon was paid on September 15, 2026, and say you buy it at 98.50 on Thursday, October 22, 2026, for regular-way settlement on Friday, October 23.

The 52.78 goes to the seller. It pays them for September 15 through October 22.

On March 15, 2027, the issuer pays the full semiannual coupon to the holder. That’s you. The amount is 10,000 x 5% / 2 = 250.00.

The two figures match.

Each owner ends up paid for exactly the days they owned the bond, measured from one settlement date to the next, which is the whole purpose of the accrued interest line: the issuer pays one coupon to one holder, and the market splits it between everyone who held the bond during that period.

When a holiday stretches the count

Weekends add days. Holidays add more.

Monday, October 12, 2026 is Columbus Day, and the bond market is closed. Here is the same bond bought two weeks earlier, once on the Thursday before the holiday and once on the Friday.

One calendar day apart on the trade date. Four days apart on the accrual.

The weekend accounts for three of those days and the holiday for the fourth, worth 38.89 - 37.50 = 1.39 in this example, and that extra interest goes to the seller, who still owns the bond until the trade settles on Tuesday and so earns the coupon for every day up to then.

Run the trade date through the settlement date calculator with the bank holidays listed. The 30/360 count follows from the date it gives. Which days count as settlement days at all is set out in next business day settlement.

What goes wrong

Counting to the trade date is the commonest slip. The rule counts to settlement. Before a weekend, that gap is several days of interest.

Including the settlement date adds a day. Leave it out.

Counting actual days throws off a corporate or municipal figure whenever a 31-day month or February falls in the span.

Buying just before a coupon to collect it runs into the same arithmetic. You hand nearly the whole coupon to the seller as accrued interest first, so the coupon you then receive mostly repays money you already paid out, a close cousin of the problem examined in dividend capture strategy.

TIPS add a layer. Their real accrued interest is also multiplied by the TIPS index ratio for the settlement date. The 30/360 example above won’t reproduce a TIPS invoice.

Checking it on your confirmation

Every bond trade confirmation shows the accrued interest as its own line. It sits beside the principal and the settlement date.

Take the last coupon date from the bond’s details. Count to the settlement date with the bond’s day count. Multiply face value by the coupon rate, then by days over 360.

A match to the cent means the dates were right. A miss of exactly one day’s interest usually means the settlement date was counted in, or the trade date was used, and a miss of several days points to a weekend or holiday you didn’t account for, or to a bond whose day count is something other than 30/360.

Selling puts the same line on the other side, as money added to your proceeds. When you can withdraw money after selling covers how those proceeds settle. How accrued interest paid or received is reported for tax is a question for a tax professional.