30/360 Day Count Convention: Variants, Regulation Z, and Tax Reporting

The 30/360 day count convention calculates interest by treating every month as exactly 30 days and every year as exactly 360 days, so each month of a fixed-rate obligation accrues the same amount regardless of whether the calendar month has 28, 30, or 31 days. On a $100,000 loan at 5%, that means a daily accrual of $13.89 and a monthly accrual of $416.67, every month, without adjustment for February or the 31st. The convention is the default for U.S. corporate bonds, municipal bonds, and agency mortgage-backed securities, and it shows up in many commercial loan agreements as well.¹

The Formula and a Worked Example

A day count convention is the rule that turns two calendar dates into the fraction of a year used for interest. Under 30/360, the number of days between a start date and an end date is:¹

Days = (Y2 − Y1) × 360 + (M2 − M1) × 30 + (D2 − D1)

Y1, M1, D1 are the year, month, and day of the start date; Y2, M2, D2 the same for the end date. Interest is then:

Interest = Principal × Annual Rate × (Days ÷ 360)

Say you hold a $100,000 bond with a 5% coupon and need the accrued interest from January 15 to March 5 of the same year. The year term drops out. (2 × 30) + (5 − 15) = 60 − 10 = 50 days. Accrued interest is $100,000 × 0.05 × (50 ÷ 360) = $694.44.

The formula handles periods that cross month boundaries without any manual counting. From November 20 to February 10 of the following year: (1 × 360) + ((2 − 11) × 30) + (10 − 20) = 360 − 270 − 10 = 80 days.

Adjustments for the 31st and February

Before you run the formula, certain dates get standardized. Under the most common U.S. version, called 30/360 Bond Basis, two rules apply:

If the start date falls on the 31st, change D1 to 30.
If the end date falls on the 31st, change D2 to 30, but only when the start date was already the 30th or 31st.²

The second rule is the one that catches people. A period from March 15 to May 31 keeps D2 at 31 because the start date wasn’t the 30th or 31st. A period from March 31 to May 31 adjusts both dates to 30.

February is treated as if it has 30 days for accrual purposes. An interest period from January 1 through the last day of February, whether that’s the 28th or the 29th, produces a 60-day count: two full 30-day months. Leap years have no effect on a 30/360 calculation.

Variants You’ll Encounter

Several flavors of 30/360 exist, and picking the wrong one can shift the day count for the same date range. The differences all come down to how month-end dates are adjusted.

30/360 Bond Basis (30/360 US). The standard U.S. convention. D2 becomes 30 only when D2 is 31 and D1 was 30 or 31. This is the version used for most U.S. corporate and municipal bonds.²
30E/360 (Eurobond Basis). Both D1 and D2 are changed to 30 whenever they equal 31, with no conditional logic. This was the standard for non-U.S. straight bonds issued before 1999.²
30E/360 ISDA. Like the Eurobond version, but the last day of February is also converted to 30. The other 30/360 variants do not make this explicit February adjustment.

If a bond indenture or swap confirmation names a specific variant, that language controls. On a large position, a one-day difference in the day count moves real money, so it’s worth checking the governing agreement rather than assuming.

Where 30/360 Applies

Three markets in the United States rely on 30/360 as the default:

Corporate bonds and municipal bonds. MSRB Rule G-33 requires municipal bond accrued interest to be computed on a 30/360 day basis.³
Agency mortgage-backed securities. Fannie Mae’s servicing guidance states that interest accrues “based upon a 30-day month and a 360-day year.”⁴
Many commercial loans, where lenders use the convention to keep monthly payments identical across a portfolio.

If you’re calculating accrued interest on a bond trade, verifying a mortgage payoff, or reconciling a fixed-income portfolio, you are most likely working with 30/360 unless the instrument specifies otherwise. U.S. Treasury securities are the notable exception: Treasury yields are based on actual day counts on a 365- or 366-day year basis, not 30/360.⁵

How It Compares to Actual/360 and Actual/Actual

Two other conventions come up often, and knowing the differences helps you spot when a lender or issuer is using something other than 30/360.

Actual/Actual

This method counts the real number of days in the interest period and divides by the real number of days in the year, 365 or 366. It’s the standard for U.S. Treasury securities.⁵ Actual/actual tracks the calendar precisely, so accruals vary slightly from month to month because months have different lengths.

Actual/360

Actual/360 counts the actual days elapsed but divides by a 360-day year. It’s standard for money market instruments like Treasury bills and commercial paper. Because the annual rate is divided by 360 but applied across 365 real days, this method produces a higher effective interest rate than the stated nominal rate. A stated 6% rate on an actual/360 basis effectively charges about 6.083% over a full non-leap year, since the rate is multiplied by 365 and divided by 360.⁶

30/360 doesn’t have that mismatch. Both the numerator (days elapsed in 30-day months) and the denominator (a 360-day year) use the same artificial framework, so 12 months of accrual add up to exactly one year of interest. Twelve months under actual/360 do not. On a $500,000 commercial loan at 6%, switching from 30/360 to actual/360 adds roughly $41.67 in interest over a full non-leap year, a 1.389% increase in total interest, and that gap compounds over a multi-year term.

What Regulation Z Requires Lenders to Disclose

When a lender uses a daily rate based on a 360-day year, federal disclosure rules apply. Under Regulation Z, a creditor may disclose a daily periodic rate of 1/360th of the annual rate without further explanation only if that rate is actually applied for just 360 days per year. If the lender applies the 1/360 daily rate for all 365 days of the year, the creditor must disclose that fact and must report the true annual percentage rate, which will be higher than the nominal rate.⁶

For closed-end credit like mortgages and auto loans, the disclosed APR must reflect the terms of the actual legal obligation. For open-end credit like home equity lines, the creditor must explain the method used to determine the balance on which the finance charge is computed. The practical check: compare the stated rate against the disclosed APR. If the APR is noticeably higher than the nominal rate, the lender is likely using an actual/360 method rather than 30/360.

The Tax Reporting Boundary

The IRS does not mandate 30/360 for tax reporting of interest income. For original issue discount on bonds, IRS Publication 1212 prescribes calculations based on the actual number of days in each accrual period rather than a 30-day-month assumption.⁷ The day count convention used for trading and accrual on your brokerage statements may differ from what’s required for tax reporting, which matters when you’re reconciling investment income across statements and tax forms.

When you review a loan agreement or bond indenture, find the day count convention in the interest-calculation section. If it says 30/360, every month will be treated identically for interest. If it says actual/360, expect a slightly higher effective rate over the year. If it says actual/actual or actual/365, the interest tracks the calendar precisely. Getting this detail right at the start prevents reconciliation problems and unexpected interest amounts later.

1
Municipal Securities Rulemaking Board. Day Counting: Securities Dated on the 15th of a Month
2
ISO 15022. ISO 15022 Data Field Dictionary
3
Municipal Securities Rulemaking Board. Rule G-33 Calculations
4
Fannie Mae Multifamily Guide. 30/360 Interest Calculation Method
5
U.S. Department of the Treasury. Interest Rates – Frequently Asked Questions
6
eCFR. 12 CFR Part 226 – Truth in Lending (Regulation Z)
7
Internal Revenue Service. Guide to Original Issue Discount (OID) Instruments