Does OID increase income?

I understand that OID, or Original Issue Discount, refers to the difference between the purchase price of a bond and its face value. It's often associated with bonds sold at a discount to their face value, and the interest income recognized over the life of the bond gradually brings the bondholder's cost basis up to the face value. So, the question at hand is: Does OID increase income? Well, let's break it down. OID is essentially a form of interest income that is recognized over the life of the bond. As the bondholder receives interest payments, they are also recognizing a portion of the OID as income. Therefore, yes, OID does increase income in the sense that it provides additional taxable income to the bondholder. However, it's important to note that OID income is taxed differently than traditional interest income. OID income is taxed using the bondholder's marginal tax rate, which can result in higher taxes for some investors. Additionally, OID income can have implications for investors who are subject to the alternative minimum tax (AMT). So, in summary, OID does increase income, but it's important to understand the tax implications and potential for increased taxes before investing in bonds with OID.