Can I reduce interest income by accrued interest paid at bond purchase even if the bonds haven't paid me any interest in that year?

No, you must have interest from the actual bond where the accrued interest was paid.

• Also include any accrued market discount that is includible in income and any gain on a contingent payment debt instrument that is includible in income as interest income.

If you did not receive a 1099-INT for the bond in question there is nothing to do.

However, if you did receive a 1099-INT for any accrued interest you did not yet receive, but rather the original owner received, you can make an adjustment.

Accrued interest.

When you buy bonds between interest payment dates and pay accrued interest to the seller, this interest is taxable to the seller. If you received a Form 1099 for interest as a purchaser of a bond with accrued interest, follow the rules earlier under Nominees to see how to report the accrued interest. But identify the amount to be subtracted as “Accrued Interest.”

Nominee.

If you received a Form 1099-INT that includes interest you received as a nominee (that is, in your name, but the interest actually belongs to someone else), report the total on line 1. Do this even if you later distributed some or all of this income to others. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Below this subtotal, enter “Nominee Distribution” and show the total interest you received as a nominee. Subtract this amount from the subtotal and enter the result on line 2.

• Schedule B Instructions

Okay, thank you.