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How to Calculate Gain or Loss on a Bond Redemption

By Motley Fool Staff – Updated Apr 29, 2025 at 11:00 PM EST

Key Points

Bonds offer predictable cash flows and have fixed repayment dates, differing from stocks.
Bond gains or losses are calculated by subtracting the purchase price from the redemption proceeds.
Understanding bond redemptions and tax implications is crucial for effective investment planning.
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Bonds don't get as much attention in the investing world as stocks do, but they play an equally important function in investment portfolios. The predictable cash flows that bonds offer stand in stark contrast to the uncertain returns of stocks. Bonds have fixed dates on which the issuer can pay back the principal amount it owes, and when that happens, bondholders have to be prepared for the tax consequences. Below, we'll look more closely at how bond redemptions get taxed and how to calculate gain or loss.

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A fanned pile of hundred dollar bills lying atop Treasury bonds. — Image source: Getty Images.

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Most bond investors choose their specific investments with the primary focus on finding ways to provide regular income over the course of the bond's lifetime prior to maturity. Yet, as important as interest income is, you also have to be prepared for what happens when the issuer redeems the bond. Otherwise, the tax consequences could take you by surprise.

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