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You are correct the amount will be Federal Taxable Income and MN will not be sending out forms 1099 since the amount is below $600. Therefore you will enter that pay as "Other reportable income."
The income is not taxable by MN so you will be asked to enter the payment amount in the MN interview as well so that a subtraction will be made on your MN return.
As for the mortgage interest deduction, that is entered in the "Deductions and Credits" section. Scroll to "Your Home" and in the dropdown you will find "Mortgage Interest and Refinancing (Form 1098).
The 1040 form is the federal IRS form which is the tax return you are filling out to send to the IRS.
Enter Mortgage Interest, Points Paid & Property Tax under
Federal Taxes (Personal in Home & Business version)
Deductions and Credits
Your Home
Mortgage Interest - Click the Start or Update Button
OR Property Taxes - Click the Start or Update Button
Then All your total itemized deductions have to be more than the standard deduction to get any benefit from them. Just enter all your itemized deductions in. The program will use whichever is larger - standard or itemized.
For 2022 the standard deduction amounts are:
Single 12,950 + 1,750 or 65 and over or blind (14,700)
HOH 19,400 + 1,750 for 65 and over or blind
Joint 25,900 + 1,400 for each 65 and over or blind
Married filing Separate 12,950 + 1,400 for 65 and over or blind
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