How to handle Purchased Accrued Interest for Treasury notes/bonds on my tax return?

You're absolutely right to question this! When you buy a treasury note/bond between interest payment dates, you pay the seller the accrued interest, and this is an important tax consideration. The purchased accrued interest you paid ($875) is actually tax-deductible. However, brokers typically report the full amount of interest paid on the 1099-INT without subtracting the accrued interest you purchased. The "Supplemental Information" section is just telling you this amount, but you need to handle the adjustment yourself on your tax return. On Schedule B (Interest and Ordinary Dividends), you should list all interest as shown on your 1099-INT, but then include a separate line item with a negative number for the accrued interest you paid when purchasing the treasuries. Something like "Purchased accrued interest - Treasury notes" and then "-$875" as the amount. This effectively reduces your taxable interest income. Keep documentation of your purchase that shows the accrued interest amount in case of questions from the IRS.

I had a similar situation last year and found the perfect solution using taxr.ai (https://taxr.ai). I was getting really frustrated with my treasury bonds tax situation because my broker's 1099 was confusing and didn't clearly show how to handle the accrued interest I paid. I uploaded my broker statements and 1099 to taxr.ai and it immediately identified the purchased accrued interest issue. The tool walked me through exactly how to report it properly on Schedule B with the negative adjustment. It also explained how this affects my tax basis for when I eventually sell or redeem the treasuries. What I really liked was that it gave me a clear explanation of why the accrued interest is handled this way, which made me feel confident I wasn't making a mistake on my taxes. Saved me from overpaying by about $200 in taxes!

I was totally wrong about taxr.ai! After my skeptical comment, I decided to try it anyway since I had some complex treasury transactions and my regular tax software was completely missing the accrued interest issue. It took like 5 minutes to upload my documents and the system immediately flagged the accrued interest payments from my multiple treasury purchases. The best part was that it created a detailed worksheet showing each purchase, the associated accrued interest, and then calculated the correct net amount that should be reported on Schedule B. What really surprised me was how it explained the future tax implications - like how this affects my basis when I eventually sell or when the bonds mature. My regular tax software completely missed this! Definitely saved me from overpaying taxes and potentially having issues down the road.

Anyone trying to reach the IRS to ask about this treasury bond interest issue? I called the general IRS number about my accrued interest question and was on hold for 2+ hours before giving up. Apparently they're super backed up right now with the filing season. Then a friend told me about Claimyr (https://claimyr.com) which got me through to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I explained my treasury bond accrued interest situation to the agent and got confirmation directly from the IRS on how to report it. They verified exactly what to put on Schedule B and how to document it. Such a relief to get an official answer instead of just guessing or hoping I interpreted the instructions correctly!

I'm eating my words about Claimyr. After posting that skeptical comment, my tax situation with these treasury bonds got more confusing when I realized I had multiple purchases with different accrued interest amounts. I reluctantly tried Claimyr and was honestly shocked when they texted me after about 20 minutes saying they'd reached an IRS agent. I got connected and spoke directly with an IRS tax specialist who walked me through exactly how to handle multiple treasury bond accrued interest payments on Schedule B. The agent confirmed I needed to list each interest payment from my 1099-INT, then create separate negative entries for each accrued interest payment I made when purchasing the bonds. She even sent me to the specific IRS publication that covers this (Pub 550). Would have taken me days to figure this out on my own if I could have even gotten through at all!

For anyone dealing with treasury bond accrued interest, make sure you keep your purchase confirmations! My broker's year-end 1099 had a different accrued interest amount than what was on my original purchase confirmation. Had to call them to sort it out. Also worth noting - if you hold these treasury notes/bonds to maturity, you'll need to remember this accrued interest adjustment for your final tax calculation. The full face value minus your purchase price (including that accrued interest) affects how you calculate your final gain/loss.

Has anyone used TurboTax for reporting treasury bond accrued interest? I'm trying to enter this negative adjustment for the accrued interest I paid, but can't figure out where to put it.

Great question about treasury bond accrued interest! I went through this exact same situation last year and it was definitely confusing at first. You're absolutely correct that you shouldn't be taxed on interest that accrued before you owned the securities. The $875 you paid in accrued interest when purchasing in August is essentially prepaid interest that you can deduct from your taxable interest income. Here's what I did on my tax return: On Schedule B, I listed all the interest income exactly as shown on my 1099-INT forms. Then I added a separate line item showing the negative adjustment for purchased accrued interest. I wrote something like "Less: Purchased accrued interest on Treasury notes" and put "-$875" in the amount column. This effectively reduces your total taxable interest income by the amount of accrued interest you paid when purchasing the securities. Make sure to keep your purchase confirmations that show the accrued interest amount - the IRS may want to see documentation if they have questions. The key thing to remember is that when you eventually receive the full coupon payments, you'll be getting interest for the entire period (including the time before you owned the bonds), but since you already paid for that accrued portion upfront, you're only taxed on the interest you actually earned during your ownership period.

This is such a common issue with treasury investments! I dealt with the exact same situation when I first started buying treasury notes. The good news is you're thinking about this correctly - you absolutely should not be taxed on interest that accrued before you owned the securities. The key is understanding that your broker's 1099-INT will show the full interest payments you received during the year, but it doesn't automatically account for the accrued interest you paid upfront. That "Supplemental Information" section is basically just an FYI - you have to make the adjustment yourself. On Schedule B, after entering all your 1099-INT amounts, add a line for "Less: Accrued interest on bond purchases" with -$875. This nets against your total interest income and ensures you're only taxed on interest you actually earned while owning the bonds. Also keep in mind this affects your cost basis for the bonds. When you eventually sell or they mature, that $875 in accrued interest you paid is part of your total investment cost. Most people forget about this piece and it can impact your capital gains calculation later. Save all your purchase confirmations showing the accrued interest amounts - the IRS occasionally asks for backup documentation on these adjustments, especially if the amounts are significant.

This thread has been incredibly helpful! I'm dealing with a similar situation where I purchased several treasury notes throughout 2024 and each purchase had different amounts of accrued interest. My broker's 1099-INT just lumps everything together, making it really confusing to figure out the total adjustment I need to make. One thing I want to emphasize for anyone else in this situation: make sure you're calculating the accrued interest correctly if you made multiple purchases. I had to go back through all my purchase confirmations to add up each individual accrued interest payment - it totaled about $1,240 across four different treasury note purchases. Also, I noticed that when I bought some notes closer to the coupon payment date, the accrued interest was much smaller compared to purchases made right after a coupon payment when the accrued interest had built up for months. This makes sense once you think about it, but it wasn't obvious to me initially. Has anyone dealt with treasury notes that were purchased and then sold before maturity? I'm wondering if the accrued interest adjustment works the same way, or if there are additional considerations when you don't hold the bonds through a full coupon cycle.

This is such a great discussion on treasury bond accrued interest! I've been reading through all the responses and wanted to add something that might help others who are dealing with this for the first time. One thing I learned the hard way is to double-check your broker statements against your 1099-INT. My broker actually had an error in their "Supplemental Information" section - they listed my accrued interest as $654 when my actual purchase confirmation showed $698. It's a small difference but could have caused issues if I'd just relied on the 1099 without verifying against my original trade confirmations. Also, for those using tax software like TurboTax or FreeTaxUSA, I found that some programs will automatically flag negative interest adjustments and ask for an explanation. Don't panic if this happens - just reference IRS Publication 550 as others have mentioned, and provide a brief explanation like "Accrued interest paid on treasury bond purchase per Pub 550." The most important thing is keeping organized records. I created a simple spreadsheet tracking each treasury purchase with columns for purchase date, face value, purchase price, accrued interest paid, and coupon payments received. This makes tax time much easier and gives you all the documentation you need if the IRS ever has questions. Thanks to everyone who shared their experiences - it's really helpful to know I'm not the only one who found this confusing initially!

This has been such an educational thread! I'm a complete newcomer to treasury investments and was feeling overwhelmed by the tax implications, but reading through everyone's experiences has really clarified things for me. I purchased my first treasury notes last September and noticed the same issue - my broker's 1099-INT shows all the interest I received but doesn't account for the $420 in accrued interest I paid upfront. I was starting to worry I'd be double-taxed on that portion. Based on what everyone has shared here, it sounds like the solution is straightforward: report all the 1099-INT interest as usual, then add a negative line item on Schedule B for the accrued interest I paid when purchasing. The references to IRS Publication 550 are especially helpful - I'll definitely review that before filing. One thing I'm curious about: does the timing of when you file matter for these adjustments? I usually file early (February), but I'm wondering if I should wait to make sure I have all the correct accrued interest amounts from my various purchases throughout the year. Thanks to everyone who shared their knowledge - this community is incredibly helpful for navigating these complex tax situations that don't always have clear guidance in standard tax prep materials!

This is exactly what I needed to see! I'm in my first year of treasury investing and have been stressing about this exact issue. I bought treasury notes in three separate purchases last year and paid accrued interest each time - $340, $280, and $195 respectively. My broker's 1099-INT just shows the total interest payments I received without any adjustment for the $815 total in accrued interest I paid upfront. I was worried I'd be paying taxes on interest that accrued before I even owned the securities. Reading through this thread, especially the detailed explanations about Schedule B adjustments and the references to IRS Publication 550, has given me the confidence to handle this correctly. I'll report all my 1099-INT interest income as usual, then add a line item for "Less: Purchased accrued interest - Treasury notes" with -$815. It's so helpful to see that multiple people have successfully navigated this same situation. The advice about keeping detailed records and purchase confirmations is spot on - I've already organized all my documentation just in case the IRS has questions. Thanks to everyone who shared their experiences and knowledge here. This community really helps make complex tax situations much more manageable for newcomers like myself!

This discussion has been incredibly informative! As someone new to treasury investing, I was dealing with the exact same confusion about accrued interest on my recent treasury note purchases. I bought several treasury notes throughout 2024 and paid about $950 total in accrued interest across all my purchases. Like many others here, my broker's 1099-INT shows all the interest payments I received but doesn't automatically adjust for the accrued interest I paid upfront. That "Supplemental Information" section just mentions the amounts without actually reducing my taxable income. Reading through everyone's experiences has clarified that I need to handle this adjustment myself on Schedule B. I'll report all the 1099-INT interest amounts as usual, then add a negative line item like "Less: Purchased accrued interest - Treasury notes" with -$950 to properly reduce my taxable interest income. The references to IRS Publication 550 are extremely helpful for official guidance, and I really appreciate the advice about keeping detailed purchase confirmations. It's reassuring to know this is a common situation that many investors navigate successfully. One question I have: for those who've done this adjustment multiple years in a row, have you ever had the IRS ask for additional documentation? I want to make sure I'm maintaining the right records long-term as I continue investing in treasuries. Thanks to everyone who shared their knowledge - this community discussion has been invaluable for understanding this complex tax treatment!

This thread has been absolutely fantastic! As a newcomer to treasury investing, I was completely lost on how to handle the accrued interest I paid when purchasing my first treasury notes last fall. I bought two treasury notes - one in September for which I paid $315 in accrued interest, and another in November where I paid $445 in accrued interest. My broker's 1099-INT shows all the coupon payments I received, but like everyone else mentioned, it doesn't adjust for that $760 total I paid upfront in accrued interest. Before finding this discussion, I was genuinely worried I'd be paying taxes on interest that built up before I even owned the securities, which seemed fundamentally unfair. Reading through all the detailed explanations here has given me complete confidence in how to handle this on Schedule B. I'll report all my 1099-INT interest as usual, then add a negative line item for "Less: Purchased accrued interest - Treasury notes" with -$760. The references to IRS Publication 550 are incredibly valuable - I've already downloaded it to review the official guidance. One thing that really stands out from this discussion is how common this confusion is for new treasury investors. It seems like the brokers could do a better job explaining this on their 1099 forms instead of just burying the accrued interest amounts in supplemental information sections. Thank you to everyone who shared their experiences and expertise. This community knowledge has transformed what seemed like an impossible tax puzzle into a straightforward adjustment I can handle with confidence!

This is such a helpful discussion! I'm completely new to treasury investing and just made my first purchase of treasury notes in December. I paid $523 in accrued interest and was so confused when I got my year-end statement showing this amount buried in the supplemental information. Reading through everyone's experiences here has been incredibly reassuring. It sounds like this is a very common situation that even experienced investors found confusing initially. The step-by-step explanations about reporting the full 1099-INT amounts and then adding the negative adjustment on Schedule B make perfect sense now. I really appreciate the specific references to IRS Publication 550 - I'm definitely going to review that before filing my return. It's also great to hear from people who've been doing these adjustments for multiple years without issues from the IRS. One thing I'm wondering about: since I only made this one treasury purchase in December 2024, and I'll probably make more purchases throughout 2025, should I expect this accrued interest adjustment to be a regular part of my tax filing going forward? It seems like anyone who regularly invests in treasury notes between coupon payment dates will deal with this situation repeatedly. Thanks to everyone who shared their knowledge and experiences. This community discussion has turned what seemed like a major tax headache into something I feel confident handling correctly!