If they give you a W-2C for 2017, you would have to file an amended return (Form 1040X) for 2017 to show the reduction in income. That would take care of everything, and you would not claim a deduction or make any other adjustment for 2018.
If they reduce the income on your 2018 W-2 by the amount you repaid, that would also take care of it, and you would not claim a deduction or make any other adjustment. That is not really the right way to do it, because you are repaying income that you received in 2017, not income that you received in 2018. But if they do it this way, I would just go along with it.
