Can I deduct an early withdrawal penalty from interest earned?

[jgsss]

on 1099-INT can I subtract box 2 from box 1 as interest earned?

[rjs]

No, you can't subtract it. But the penalty will be subtracted from your income on your tax return. When you enter your Form 1099-INT in TurboTax, enter the full amount of interest in box 1, and check the box that says "My form has info in more than just box 1." That will give you a place where you can enter the box 2 amount. That amount will appear on Schedule 1 line 18 and will be included in the total adjustments on Form 1040 line 10. Line 10 gets subtracted from your income to arrive at your Adjusted Gross Income (AGI) on line 11.

[PattiF]

No, you can access Box 2 on Form I099-INT and enter the early withdrawal penalty there.

1. Sign in to your TurboTax account and open or continue your return
2. Select Federal from the menu, then Wages & Income (this is called Income & Expenses in TurboTax Self-Employed)
3. Locate the section titled Investments & Savings and select Show More, then select Start or Revisitnext to Interest on 1099-INT
4. Select Yes on the screen Did you receive any investment income? then Continue
   • If you see the screen Your investments & savings or Here's your 1099-INT info, select Add investments or Add another 1099-INT, then Continue
5. On the next screen, select how you want to enter your Form 1099-INT:
   • If you want to import your form, search for your brokerage or financial institution. Sign in to your online account and select Get my form
   • If you want to upload a copy of your form or manually enter the info, select Enter a different way, and follow the instructions to enter your 1099-INT
   • Choose to type it in yourself

After you enter the interest in Box 1, check the box below that says "my form has info in other boxes". Box 2 will pop up and you can enter the early withdrawal penalty there.

@jgsss