Hi ackern32, thank you for joining the special forum today.
The relocation benefit was included in your taxable income in 2020 and you paid income tax on the amount, and now you need to pay back the relocation benefit in 2021 to your employer.
The answer to your question depends on the amount of payback. If the amount is $3,000 or less, there is not much you can do.
Quote
Repayments of Income Generally, repayments of amounts that you included in income in an earlier year is a miscellaneous itemized deduction and can no longer be deducted.
Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax.
Unquote
Pages 5 and 11 of IRS Pub 529 https://www.irs.gov/pub/irs-pdf/p529.pdf
For repayment over $3,000, there are two methods: take a deduction against taxable income, or calculate a credit against the tax liability for tax year 2021. The steps require some work, which is detailed in page 36 IRS Pub 525 under “Repayments”.
https://www.irs.gov/pub/irs-pdf/p525.pdf
Hope the above helps.
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