I read somewhere that EWPs are tax deductible. If this is still true after the changes to the tax law, it might make sense to take EWPs on my remaining low-paying CDs before year end.
Do any of you know from experience a) How the EWP is reported on a 1099? b) Where the penalty gets deducted on the return? Is there any tax advantage to taking an EWP? My income this year is coming in very close to a breakpoint that will raise my Medicare premium so I'm wondering if reducing my interest income with the EWP might be useful in keeping me under it. The calculators tell me I will come out ahead if I break these CDs and reinvest at currently available rates.
BTW, for those who always warn that institutions might not honor EWP requrests, so far I have had no problems with them. I have already broken a couple CDs at Barclays. There was no trouble getting his done, though they delayed making the transaction for several days. That bank holiday for the Bush funeral was part of the reason, but all in all it was not a problem. NASA credit union told me they will move the money into my Share account immediately after I make the request.
How are Early Withdrawal Penalties for CDs Handled on Tax Return?
Re: How are Early Withdrawal Penalties for CDs Handled on Tax Return?
Early Withdrawal Penalties are still deductible as an adjustment to income. The 1099 will have a box titled "Early Withdrawal Penalty". For 2018, the EWD goes on line 30 of Schedule 1. On the 1040, it will be reflected in the difference between Lines 6 and 7.
Re: How are Early Withdrawal Penalties for CDs Handled on Tax Return?
Would this be fairly seamless in tax software and importing info from the 1099? Or do I have to go out of my way to put this info in? Thanks! (clearly I don't do the taxes)