It depends. You can only use the "claim of right" Section 1341 credit if the amount is over $3,000 repaid per tax year. You cannot take the credit in 2022, if you repaid some of it in 2021. However, it sounds like you may have repaid more than $3,000 in 2021, which would qualify you to take the claim of right credit for the tax year 2021. If so, you cannot include the amount repaid in 2022.
The "claim of right" Section 1341 credit can be claimed as either an itemized (miscellaneous) deduction or as a credit. The deduction is the simpler way to claim your repayment, but a credit might save you more money.
For an explanation of the methods and how to calculate your amounts for the Section 1341 credit, please see Publication 525 and go to page 36. Figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.
To enter as an itemized deduction, please follow the instructions below:
- Open your return.
- Click on Federal.
- Click on Deductions and Credits.
- Scroll down to Other Deductions and Credits and Click Start next to Other Deductible Expenses.
- Answer Yes to the question Did you have any of these other expenses?
- Enter the amount.
If you decide to claim your repayment of over $3000 as a credit, follow the information in Publication 525. This requires a special computation, and you would need to use a Desktop version of TurboTax and enter your credit using the Forms mode.
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