Do you pay taxes on social security benefits that were overpaid in 2017 and have been refunded to social security this year (2018)?

[KatherineC · Accepted solution]

You report all of the Social Security Benefits you received in 2017 on your 2017 income tax return.

You would report the repayment of Social Security Benefits on your 2018 return (the year of repayment).

The Claim of Right allows you to take a deduction (or credit) for repayment of income that was taxable in a prior year.  If you don’t itemize, that won't be helpful to you!

IF you pay back less than $3000, the repayments are deductible on Schedule A (subject to the limitation of 2% of your Adjusted Gross Income.) in the year of repayment.

If you paid more than $3000 and prefer to take a deduction in the year of repayment on your Schedule A the deduction would not be subject to the limitation of 2% of your Adjusted Gross Income.

IF you pay back more than $3000, you have the option of taking a tax credit in 2018 (in the year of the repayment) instead of the deduction. To take this credit you will have to use TurboTax CD/Download because the credit amount has to be directly entered on Line 73, box d of your Form 1040.

Check with us again next year for instructions on how to enter the deduction or credit.