The discount from the face value of a bond or other debt instrument at the time that it is issued. Under relevant tax rules, OID is the difference between the stated redemption price at maturity and the offering price. If more than de minimis, this discount is accrued over the life of the bond or other debt instrument and is treated as a form of taxable interest. Bond or debt holders include OID in income as it accrues, whether or not the issuer makes any taxable interest payments.

An original issue discount bond is a bond issued at a price below par. The most extreme example of an OID bond is a zero coupon bond.

For more information, see Practice Note, Foreign Debt Offerings in the US: Tax Consequences for Investors.