topic 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? in Investors & landlords

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?

Smitht33 — Wed, 11 Feb 2026 03:10:21 GMT

Many bonds pay interest twice a year. If I buy bonds in November 2023 that pay interest in February and August, I have to pay the seller of the bonds the interest they earned from August to November 2023. But, I will not receive any interest from the bonds until February of 2024. Do I have to wait until 2024 before I can reduce my interest income by the accrued interest paid at bond purchase in 2023? Or can I apply the accrued interest paid at bond purchase in 2023 to interest income I earn from other sources (other bonds) in 2023?

Thanks for your help.

Re: Can I reduce interest income by accrued interest paid at bond purchase even if the bonds have...

DianeW777 — Sat, 17 Feb 2024 15:44:42 GMT

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

Re: 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?

Smitht33 — Wed, 21 Feb 2024 22:24:13 GMT

Okay, thank you.