If the repayment amount is less than $3,000, then you can't get a deduction for it, as it is considered an miscellaneous itemized deduction, which is not allowed in 2024. If the amount is more than that, you may be able to get a tax credit for the taxes paid on the income you have to repay. This is considered a claim of right and you can use the desktop version of TurboTax to entered it on your tax return.
First, you need to recalculate your income tax for 2023 as if you hadn't received the money you repaid. You can do this by preparing an amended return in TurboTax, not to file, but to see what the adjusted tax amount is. You will then subtract the amended tax from your actual tax, and the difference is your claim of right credit to appear on your 2024 tax return. If you haven't file your tax return for 2023 yet, you can simply enter the adjusted income amount and note the tax and then compare it to your actual tax, so you don't have to do the amendment later.
To report a claim of right repayment credit in TurboTax follow these instructions:
- Using the desktop version of TurboTax, bring up the "Forms" mode by clicking on that icon on the menu bar
- Choose the 1040/1040SR Wks in the list of forms
- Scroll down the 1040/1040SR Wks until you see Part II - Other Payments and Refundable Credits
- Enter the amount of the credit on line 12 (D) Claim of Right, IRC 1341 credit for repayments of prior year income
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