Adjustments to Interest Income

davidmloch — Mon, 23 Feb 2026 10:27:48 GMT

I had an early withdrawal penalty from an interest-bearing Certificate of Deposit (CD). Can I deduct the penalty from my interest income? If so, what "reason for adjustment" should I use?

Re: Adjustments to Interest Income

JamesG1 — Mon, 23 Jan 2023 15:50:10 GMT

The entry will deduct the penalty from income on line 10 of the Federal 1040 tax return. With the following method, no reason is required.

Follow these steps:

Down the left side of the screen, click Federal.
At the top of the screen, click Wages & Income.
Click Show more to the right of Investments and Savings.
Click Start / Revisit to the right of Interest on 1099-Int.
Click Add investments.
At the screen Get ready to be impressed, click Continue.
At the screen Let’s import your tax info, click Enter a different way.
At the screen OK, let’s start…. select Interest. Click Continue.
At the screen How do you want …. Select Type it in myself.
At the screen Let’s get the info from your 1099-INT, click on My form has info in other boxes.
Enter the penalty in Box 2 Early withdrawal penalty.

The entry will be found on line 18 Part II of Schedule 1 Additional Income and Adjustments to Income.

topic Adjustments to Interest Income in Deductions & credits

Adjustments to Interest Income

Re: Adjustments to Interest Income