You do not need to explain your choice of credit over deduction. You have the right to choose the more beneficial method.
If the repayment is $3,000 or less, it is a miscellaneous itemized deduction and can longer be deducted.
If the repayment exceeds $3,000, you can only report it in the year you actually repaid the claim.
There are a couple of ways to get a tax break by reporting the repayment in the year of repayment:
- You'll claim it as a simple deduction from the current year's income. This is the preferred option if you itemize your deductions
- Use TurboTax Desktop to figure out the amount of tax you overpaid and take a refundable tax credit
- Test both methods and choose the one that results in the lowest tax.
Please read this TurboTax Help topic for more information.
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