Return on Software: Maximizing the Return on Your Software Investment

Interest Income and Income Taxes

When you loan money to someone else and they pay you interest in return, that interest is usually considered taxable income. Referring back to Figure 2.1 in Chapter 2, that interest income needs to be included in the net income before taxes. There are a few exceptions to this; the most common is when the interest income is from municipal bonds. (Bonds are discussed in more detail in Chapter 18.) In the United States, municipal bonds are usually exempt from federal income tax and that exemption can make a difference in the after-tax desirability of different alternatives when bonds are part of the study. Consider two different $5000 bonds, both of which are for 10 years with interest payable annually. Assume that ...