Retirement tax questions

It depends. If you had to repay any social security benefits that you previously included in your taxable income then you may be able to take a deduction.  The repayment must be greater than $3,000, all of which was included in your taxable social security from a prior year. If there was no previous year taxable social security income, there is nothing to do.

Keep in mind it is only a deduction or credit if you actually included the social security in your taxable income in a prior year, greater than $3,000.

If the repayment is greater than $3,000 you have two options (option 2 is most common).

1. Credit: If you choose to use the credit instead of the income reduction, then you would have to calculate that manually.
   • The tax return would have to be completed in the TurboTax Desktop version if the credit is used.  For assistance with this, see: How to switch from online TurboTax to the TurboTax software? and TurboTax Prior Year Products.
     1. ​​​​​​​Figure your tax for 2024 without deducting the repaid amount.
     2. Refigure your tax from the earlier year (the year you originally reported the income) without including in income the amount you repaid in 2024.
     3. Subtract the tax in (2) from the tax shown on your return for the earlier year. This is the credit.
     4. Subtract the answer in (3) from the tax for 2024 figured without the deduction (step 1)
2. Income Reduction Method (most common): If you choose to use the income reduction method you can use the TurboTax Online or TurboTax Desktop.​​​​​​​

Follow the steps below for the method you have selected.

Taking the Income Reduction in TurboTax

1. Login to your TurboTax account or open your tax return.
2. Click on Tax Home and then Deductions & Credits.
3. Locate the section Other Deductions and Credits (you may first need to click on show all tax breaks if working online or I’ll choose what I work on if working in the installed desktop version.)
4. Click Start (or Revisit) beside  Other Deductible Expenses.
5. A number of questions will appear on the upcoming screens. You are looking for the one that reads Claim of right repayment over $3,000. Click yes when you see this screen. (Be sure to ignore the similar question, repayments of $3,000 or less.)
6. Enter the amount of the repayment in the box Claim of right repayment over $3,000 and click Continue.

Taking the credit in TurboTax (less common)

There are two components to taking the credit in TurboTax. The first part requires determining the amount of the tax that was overpaid in the year the income was actually received. This requires using the TurboTax Desktop product (or another method) to determine what the tax liability would have been without the income. 

1. The credit can only be applied using the TurboTax Desktop product installed on a computer, in the Forms mode.
2. Switch to Forms mode by clicking on Forms icon in the program.
3. In the list of forms on the left click on 1040/1040RSR Wks above the Form 1040 itself.
4. Scroll down to Other Credits and Payments Smart Worksheet (near the bottom) and enter the amount that you have computed on Line E Claim of Right, IRC 1341 credit for repayments of prior year income.  (Schedule 3 and zoom right to the worksheet and easily entered)
5. Click on the Step-by-Step or Easy Step icon in the upper right corner to return to the interview mode and finish working on your tax return.​​​​​​​

@Weese