ExpertGlossary

Imputed interest is interest you are assumed to have collected even if that interest was not paid.

For example, you pay income tax on the imputed interest of a zero-coupon bond you hold in a taxable account even though the interest is not paid until the bond matures.

Similarly, you may be required to pay income tax on imputed interest if you make an interest-free loan, even if that loan is to your children or another member of your family. The government's position, in this case, is that you should have charged interest even though you didn't do so.