Interest paid on bonds is tax deductible by the company paying the interest, while dividends paid on stock is not tax deductible by the company paying the dividends.

Question

Quizplus · Accepted Answer

Interest paid on bonds is considered a business expense and is therefore deductible before taxes, reducing the taxable income of the company. Dividends paid on stock are considered a distribution of after-tax profits to shareholders and are not deductible by the company.

Interest Paid on Bonds Is Tax Deductible by the Company