This situation is referred to as a Claim of Right under IRC Section 1341. It can be claimed as either an itemized (miscellaneous) deduction or as a credit if the amount repaid is more than $3000. The deduction is the simpler way to claim your repayment, but a credit might save you more money.
To claim the repayment as an itemized deduction, you would use TurboTax Online Deluxe or a higher version.
- Click on Federal Taxes on the left side of your screen.
- Click on Deductions and Credits.
- Select All Tax Breaks, and scroll down to Other Deductible Expenses.
- On Did you have any of these less common expenses? say Yes.
- If your repayment was less than $3000, enter the amount and description on the screen Tell us about your less common expenses
- Continue to the screen Did you have any of these other deductions? If your repayment was more than $3000, answer yes.
- Enter the amount on the next screen.
If you decide to claim your repayment of over $3000 as a credit, follow the information starting on page 33 of IRS Publication 525 Taxable and Nontaxable Income under Repayments. This requires a special computation, and you would need to use a Desktop version of TurboTax and enter your credit using the Forms mode. Also see this answer for more information.
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