RobertG
Expert Alumni

Deductions & credits

If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it.

 

If your long term disability was not included in income in a prior year, you would not be able to deduct it or claim a credit.

 

If you reported this income in prior years, you can claim repayments of over $3,000 on your tax return. You can deduct this kind of repayment under Internal Revenue Code section 1341 as a 'Claim of Right'. 

 

Deducting a repayment is covered in IRS publication 525 on page 34.  

 

If the amount you repaid was more than $3,000, you can deduct the repayment as an 'other itemized deduction' on Schedule A (Form 1040), line 16. You can also choose to take a tax credit for the year of repayment. Figure your tax under both methods and compare the results. Use the method (deduction or credit) that results in less tax.

 

The way to figure these amounts is shown in Publication 525.

 

To claim the credit you will need to use a TurboTax desktop edition, so you can enter it in 'Forms Mode'.

 

In the Forms mode, click on Schedule 3 line 12, and it will take you to the  'Other credits and payments smart worksheet'.  Here is where you enter your 'Claim of Right, IRC 1341 credit for repayments of prior year income'.

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