Q. Are you suggesting I might be able to deduct $40,000, not $16,000, on my 2019 taxes?
A. No. Yes (with the emphasis on MIGHT) if you had paid back the full $160K. But, you only paid back $16K. So, you might be able to get back the tax you paid on $16K , back in 2008. But it is not a deduction. It's much better, it's a tax credit; an actual reduction (apparently about $4000 [25% of 16K]) )of your 2019 tax liability.
Q. In my post I meant to say I take a deduction on line 21 Schedule 1, not Schedule A.
A. No. You do not get to take an "above the line" deduction on Schedule 1, or anywhere else directly on form 1040. If you elect the deduction, instead of the credit, it goes on Schedule A (itemized deductions).
