Did you report the Social Security using the lump-sum method?
The Social Security lump sum payment process requires you to enter information from your previous years tax returns. Then the tax that would have been due from one or more prior year tax return is simply added to your 2024 tax return as an additional tax assessment.
At the screen Did you receive any lump-sum payments?, answer Yes.
See also this TurboTax Help.
The repayment of the insurance may have qualified you for the claim of right repayment over $3,000.
A claim of right repayment is a deduction you can take in the current tax year if you are required to pay back income in excess of $3,000 from a previous tax year that you thought you could keep. You reported and paid taxes on the money, not knowing you would have to pay it back.
Examples of this type of income include: the repayment of signing bonuses, moving expenses, unemployment compensation, and other funds.
In Turbotax Online, the claim of right repayment over $3,000 may be reported as a deduction by following these steps.
- Down the left side of the screen, click on Federal.
- Down the left side of the screen, click on Deductions & Credits.
- Click the down arrow to the right of Other Deductions and Credits.
- Click to the right of Other Deductible Expenses.
- At the screen Did you have any of these other expenses?, click Yes.
The deduction is reported on line 16 of Schedule A Itemized Deductions.
IRS Publication 525 Taxable and Nontaxable Income, page 37, states:
Repayment over $3,000
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, if you included the income under a claim of right. This means that at the time you included the income, it appeared that you had an unrestricted right to it. However, you can choose to take a 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.
See this TurboTax Help. Taking the credit option involves using TurboTax Desktop.
@MFonseca
[Edited 04/10/25 | 8:50 pm PST]
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