How do I file this correctly? - Unfortunately, with a little bit of effort.
This is referred to as Claim of Right (credit or deduction). Since the amount repaid was more than $3000, you can get a tax credit this year for taxes you paid when you received the Selective Reenlistment Bonus payments.
Since your repayment is greater then $3,000, instead of entering the amount repaid as an itemized deduction on Schedule A, you can enter a Claim of Right tax credit on Form 1040 Line 31 (also on Schedule 3, Line 12d).
This tax credit can only be entered directly on Form 1040, so you have to use the 2020 desktop editions as the online editions do not have the capability to enter tax data directly on a form, schedule or worksheet. Using the desktop editions in Forms mode to access Schedule 3, Line 12d of Form 1040.
To figure the Claim of Right tax credit, use Method 2 in IRS Publication 525 Taxable and Nontaxable Income. page 35.
