What is a bond premium on a tax-exempt bond?
If you pay a premium to buy a tax-exempt bond, the premium is part of your cost basis in the bond and will be amortized over the life of the bond.
This generally means that each year, over the life of the bond, you use a part of the bond premium to reduce the amount of interest included in your income. You must reduce your basis in the bond by the amortization for the year.
This generally means that each year, over the life of the bond, you use a part of the bond premium to reduce the amount of interest included in your income. You must reduce your basis in the bond by the amortization for the year.
