Bank CD penalties being a tax deduction

[Drake3287]

Just received a 2022 1099 form for a bank CD I have and I notice it lists the penalty amount I paid to withdraw the funds early. In my case I simply reinvested it at a higher rate so I was money ahead. After doing a quick search it looks like these penalties are a deduction on my taxes. Apparently it's considered an "above the line" adjustment to income.

Never having paid an early withdrawal fee I was surprised by this. I'm guessing many people who took advantage of these higher rates and did the same last year.

[kork13]

Interesting. So did they report the interest income for the CD as the total amount (pre-penalty), and the penalty as a separate line item? I suppose doing it that way is no different than just reducing your reported interest income by the amount of the penalty... But I wonder if there's a circumstance where there would be a difference in net outcome. I just can't think of anything...

[Drake3287]

Correct. In box 1 it shows the interest earned and in box 2 the early penalty amount. Not a huge amount but I'll take anything.