If the interest refund is for interest paid in tax year 2020, you do not have to do anything. However, If you had the benefit of getting a tax break in a previous year, and you itemized deductions it will be taxable.
The IRS instructions state:
Box 4. Do not deduct this amount. It is a refund (or credit) for overpayment(s) of interest you made in a prior year or years.
If you itemized deductions in the year(s) you paid the interest, you may have to include part or all of the box 4 amount on the “Other income” line of your 2020 Schedule 1 (Form 1040).
No adjustment to your prior year(s) tax return(s) is necessary. For more information, see Pub. 936 and Itemized Deduction Recoveries in Pub. 525.
If you do need to post this go to:
- Income & Expenses
- Scroll down to Less Common Income
- Select Reimbursement deduction from prior year
- Other Itemize Deduction
- Enter the amount
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