I received a "refund of mortgage interest paid." I deducted the interest in prior years (2011, '12, '13). How do I account for this on my 2017 taxes?

[chiz147]

In March 2017 I received a "refund of mortgage interest paid" as part of a federal lawsuit against one of my former mortgage holders. I deducted this mortgage interest in previous years (2011, 2012, 2013). I'm assuming this 'refund' is now taxable, but how do I account for this on my 2017 taxes?

[CherylW · Accepted solution]

Report it on Form 1040, line 21, Other Income.

This, from IRS Publication 936:

Refunds of interest.   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. If you need to include the refund in income, report it on Form 1040, line 21.

To report it in Turbo Tax:

1.  Go to Personal Income then click on I'll choose what I work on.

2.  Scroll down to Less Common Income.  

3.  Click on Start or Update by Miscellaneous Income .

4.  Click Start or Update by Other Reportable Income.

5.  Follow the screens from there.