The penalty tax will be listed on your 1099-R.
When you enter the 1099-R, that penalty tax will be entered as well.
You don't really get to "Deduct the penalty" but it will be included as tax you already paid.
If this was a penalty on a CD in an IRA, the penalty may have lowered the value of the IRA. In this case, you simply lost value because you did not adhere to the terms of the CD. That wouldn't be considered as tax, so there would be nothing to report.
If this is something else, please continue your question with a little more information.
@user1950611
[Edited 04/14/2024 I 3:46pm PST ]
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