Yes, your can deduct for a taxable CD. When you enter the interest income on Form 1099-INT, check the box beside 'My form has info in more than one box 1'. Then enter the penalty in box 2. That will reduce your adjusted gross income by the penalty amount.
For a CD that is held within an IRA, there is no taxable event and nothing to deduct as SU bsch4477 has noted below.
[edited 1/31/18| 4:19 pm PST]
Yes, your can deduct for a taxable CD. When you enter the interest income on Form 1099-INT, check the box beside 'My form has info in more than one box 1'. Then enter the penalty in box 2. That will reduce your adjusted gross income by the penalty amount.
For a CD that is held within an IRA, there is no taxable event and nothing to deduct as SU bsch4477 has noted below.
[edited 1/31/18| 4:19 pm PST]
TT PAula might have not realized that the CD was in an IRA. The rules for taxable accounts are different than for CDs held in an IRA. ... If you have an early withdrawal penalty in an IRA then there's no taxable event, and you also won't be able to deduct the lost interest or penalty.