A bond’s coupon date is the scheduled calendar day the issuer pays interest to whoever holds the bond. Most bonds carry two coupon dates a year, spaced six months apart, and those dates are fixed at issuance and stay put until the bond matures. The date matters for three practical reasons: it tells you when cash arrives, it determines who gets the payment when a bond changes hands, and it shapes how the interest is taxed.
How the Payment Schedule Is Set
When a bond is first sold, the offering documents lock in the coupon rate and the coupon dates. The coupon rate is the annual interest rate expressed as a percentage of face value, usually $1,000. The coupon dates are the specific days each year the issuer distributes that interest. U.S. Treasury notes and bonds pay every six months.1TreasuryDirect. Understanding Pricing and Interest Rates Corporate and municipal bonds follow the same semi-annual convention in most cases, though some pay quarterly or annually.
The math is simple. A $1,000 bond with a 5% coupon generates $50 a year. Split across two coupon dates, that’s $25 every six months. Those payments continue until the bond matures, when the issuer sends the final interest payment along with the $1,000 principal.
When a Coupon Date Falls on a Weekend or Holiday
Coupon dates are calendar dates, but issuers cannot wire money on a Saturday or a federal holiday. The standard practice is to push the payment to the next business day. For U.S. Treasuries, federal rules spell this out: if a payment date lands on a day the Federal Reserve isn’t open, the payment goes out the next business day, and no extra interest accrues for the delay. Most corporate and municipal bonds do the same, though some bond indentures specify that if the next business day falls in the following calendar month, the payment rolls backward to the preceding business day instead.
Who Actually Gets Paid: Record Date and Ex-Coupon Date
Bonds trade constantly on the secondary market, so the issuer needs a rule for deciding who receives each coupon. Two procedural dates handle it.
The record date is the cutoff. The issuer checks its books on that date, and whoever is registered as the owner receives the upcoming payment. If you bought the bond but the trade hasn’t settled by the record date, the payment goes to the seller.
The ex-coupon date, sometimes called the ex-interest date, is the first day the bond trades without the right to the next coupon. Buy on or after it and the seller keeps the upcoming payment. Buy before it and the payment is yours. Under the current T+1 settlement cycle for most U.S. securities, trades settle one business day after execution, so the ex-coupon date generally falls one business day before the record date.2U.S. Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle A bond’s market price typically drops by roughly the coupon amount on the ex-coupon date, since buyers no longer receive that upcoming payment.
Accrued Interest When You Trade Between Coupon Dates
Bonds rarely trade on the exact coupon date. When a trade happens between payment dates, the seller has earned interest for the days they held the bond since the last coupon, but the buyer will collect the full next coupon. To make that fair, the buyer pays the seller the earned-but-unpaid interest at settlement. This is called accrued interest, and it gets added on top of the negotiated price.
Say a bond pays $25 every six months and you buy it three months after the last coupon date. You’d owe the seller roughly $12.50 in accrued interest at closing. On the next coupon date, you collect the full $25, netting you about $12.50 for your three months of ownership.
What counts as “three months” depends on the day count convention. Municipal and corporate bonds generally use 30/360, which treats every month as 30 days and the year as 360.3MSRB. Rule G-33 Calculations U.S. Treasuries use actual/actual, which counts the real days in each month and between coupon payments.4U.S. Department of the Treasury. Interest Rates – Frequently Asked Questions The difference is rarely more than a few dollars on a typical trade, but it explains small mismatches on a confirmation statement.
How Coupon Payments Are Taxed
Interest from most bonds counts as ordinary income, taxed at your regular federal income tax rate in the year you receive it.5Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses Your broker or the issuer reports the amount on Form 1099-INT when total interest paid reaches $10 or more for the year.6Internal Revenue Service. About Form 1099-INT Interest Income You owe tax on all of your bond interest even if a 1099 doesn’t arrive for a particular holding.
Municipal Bond Interest
The major exception is municipal bonds issued by state and local governments. Interest on these bonds is generally excluded from federal gross income under the Internal Revenue Code.7Office of the Law Revision Counsel. 26 USC 103 – Interest on State and Local Bonds If you live in the state that issued the bond, the interest is often exempt from state and local income tax as well. Not every municipal bond qualifies. Private activity bonds and arbitrage bonds can lose the exemption, and interest from certain private activity bonds may trigger the alternative minimum tax.8MSRB. Municipal Bond Basics
Accrued Interest at Tax Time
The accrued interest you paid a seller when you bought a bond between coupon dates gets special treatment. You don’t deduct it as an expense. When you receive the next full coupon, you subtract the accrued interest you paid from your reported interest income. The IRS walks through it in Publication 550: include the full coupon shown on your 1099-INT, then list the accrued interest you paid as a subtraction on Schedule B.5Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses The seller reports the accrued interest they received as taxable income for that year. The interest gets taxed once, split between buyer and seller based on how long each held the bond during the coupon period.
Bonds Without Coupon Dates
Not every bond has coupon dates. Zero-coupon bonds pay no periodic interest at all. They’re sold at a discount to face value and pay the full face value at maturity, so a $1,000 zero might sell for $600 and pay $1,000 years later. The catch is phantom income: federal law requires you to include a portion of that built-in gain, called original issue discount, in gross income each year as it accrues, even though no cash arrives until maturity.9GovInfo. 26 USC 1272 – Current Inclusion in Income of Original Issue Discount Your broker or the issuer reports it on Form 1099-OID when the amount is $10 or more for the year.10Internal Revenue Service. About Form 1099-OID, Original Issue Discount Each year’s accrual raises your cost basis, so the same gain isn’t taxed again at maturity. Holding zeros inside a tax-advantaged account like an IRA sidesteps the annual tax bill entirely.