The accrued interest you paid is not deductible. Rather you subtract
it from your next coupon/interest payment. So you receive $600 every
six months and paid $500 accrued interest, then your next interest
payment will be reported as $100 (or rather as $600 and -$500 on the
next line in Schedule B). Also, the person who received the interest
will report the accrued interest as income on their Schedule B.
Also, I think if you bought near the end of the year and the coupon
payment was received the following year, you only subtract the accrued
interest on your next year's tax return. But the person who receives
the accrued interest will report it on this years tax return.