If you paid tax on the long term disability income in previous years, you can take a credit in 2023 for the taxes you paid on the income. You can only do this if the repayment was over $3,000. This is called a claim of right and you can enter it in the desktop version of TurboTax by following these steps:
- Using the desktop version of TurboTax, bring up the "Forms" mode by clicking on that icon on the menu bar
- Choose the 1040/1040SR Wks in the list of forms
- Scroll down the 1040/1040SR Wks until you see Part II - Other Payments and Refundable Credits
- Enter the amount of the credit on line 12 (D) Claim of Right, IRC 1341 credit for repayments of prior year income
You may need to amend your previous year tax return to determine the change in tax. You will see on option for this on your home page in TurboTax, under Your tax returns and documents at the bottom of the page. You will not file the amended return, you just need to remove the income that was paid back to determine the tax you paid on it. It will be the difference in tax due or refunded when you remove the income you paid back.
Income repayments of less than $3,000 can only be deducted as miscellaneous itemized deduction, which is not allowed for the 2023 tax year.
You can download your online TurboTax program to your computer so you don't have to re-enter all of your information. You will see an option for that on your left menu bar while working on your program in TurboTax. Look for the Tax Tools menu option, then Tools, then see the option on the right to Save your 2023 return to your computer.
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