Points to know
- Interest is taxed at your usual income tax rate.
- "Interest dividends" from funds are taxed like regular interest.
Even if you're new to investing, you're probably familiar with interest income. It's paid by many bank products like savings accounts and CDs (certificates of deposit). It's also paid by bonds and money market products.
If you own bonds or money markets through a mutual fund or ETF (exchange-traded fund), the interest payments will go to the fund and will then be passed on to you as "interest dividends" (which are treated as interest for tax purposes).
Some bonds issued by government entities have special tax treatment.
Get information on the tax treatment of government & municipal bonds
Interest income is taxed at your usual income tax rate.
Interest on individual securities is reported to you and to the IRS on Form 1099-INT. Interest paid by funds is reported on Form 1099-DIV.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.
All investing is subject to risk, including the possible loss of the money you invest.