Amount paid over the face value of the bond. Taxable bond interest is reduced by the bond premium amortization amount each year until the bond matures.
The writing down of the excess of the purchase price of a bond over its par (face) value such that if the bond were held to maturity, its par value would equal its basis to the investor at date of maturity.
For a bond purchased at a price above par (or accreted value on an OID), a portion of the premium is written down, or "amortized," each year prior to maturity. This adjustment reduces the "basis" price used in calculating capital gains or losses.