If you repaid amounts reported as income in the prior year -
----- if the amount is $3,000 or less, it is a miscellaneous itemized deduction subject to the 2% limitation.
----- if the amount is more than $3,000, it is a miscellaneous itemized deduction which is not subject to the 2% limitation.
If the amount was received under a "claim of right" (you had unrestricted use of the funds but later found out you didn't), you have one more choice: if the amount is more than $3,000, you can choose instead to claim a credit for the additional tax incurred by reporting the repaid amount in income. See IRS Publication 525 for an explanation of that method. It is available at: http://www.irs.gov/publications/p525/ar02.html#d0e9279
Look under deductions and credits, then other deductible expenses, then less common expenses if the amount is under $3,000.
Turbotax on-line does not support the "claim of right" computation. Turbotax desktop, in the forms mode, permits the credit to be entered in the "smart worksheet" , but you still would need to compute it manually.
