@sb2606
Since you repaid more than $3,000, you have a choice of two ways to report the repayment on your 2024 tax return. You can claim either an itemized deduction for the amount you repaid, or a credit that is determined by a recalculation of your 2023 tax return. You can choose whichever makes your 2024 tax lower. Either method has potential drawbacks, which I will outline below. For more details about the two options, see "Repayment of benefits received in an earlier year" on page 15 of IRS Publication 915. Publication 915 refers to the itemized deduction as "Method 1" and the credit as "Method 2."
Here's how to enter the itemized deduction in TurboTax.
- Go to Federal Taxes > Deductions & Credits > Other Deductions and Credits > Other Deductible Expenses.
- The first screen asks if you paid any generation-skipping taxes. If you didn't, click No.
- The next screen asks if you had any "less common expenses," one of which is repayments of $3,000 or less. You repaid more than $3,000, so click No.
- The next screen asks if you have certain other expenses. Click Yes.
- On the next screen, enter the total amount that you repaid in the second box, labeled "Claim of right repayment over $3,000." Then click Continue.
- The deduction will appear on Schedule A line 16.
To claim the credit, there are two possible complications. First, TurboTax will not calculate the amount of the credit for you. You have to do it yourself, as described in Publication 915. It's not hard to do if you have the desktop TurboTax software for 2023 and the .tax2023 data file for your 2023 tax return. Second, if the credit works out better, there is no way to enter the credit in TurboTax Online because it's not covered in the TurboTax interview. The credit can only be entered in forms mode in the desktop TurboTax software. But you said you already switched to the desktop software, so this would not be a problem for you.
Here's how to enter the credit in the desktop TurboTax software. In forms mode, open the "Form 1040 or Form 1040-SR Worksheet." Scroll down to the "Other Credits and Payments Smart Worksheet" near the bottom. Enter the credit that you calculated on line D of the "Other Credits and Payments Smart Worksheet." The repayment will then appear on Schedule 3 line 13b, "Credit for repayment of amounts included in income from earlier years."
The deduction is relatively easy to enter in the TurboTax interview. But it's an itemized deduction. You will not get any benefit from it unless your total itemized deductions are more than your standard deduction. And you will not get the full benefit of the deduction unless your other itemized deductions, without the repaid Social Security, are more than your standard deduction. But if you are already itemizing deductions for 2024, the itemized deduction is a good choice. In that case, if your total income is roughly the same in both years, there is not likely to be much difference between the deduction and the credit. You could just claim the deduction if you don't want to deal with the complications of claiming the credit.
