This typically wouldn't be reported in your return unless you wish to claim this either as a deduction or credit. If you are able to itemize your deductions, you may claim a repayment amount that exceeds $3000. You also can claim a credit on your return in the following manner. If you wish to claim a credit, you will need TurboTax Desktop because you will need to prepare this in the forms themselves.
To figure the credit:
- Sign in to your account.
- Select the return for the year you received the money (for example, if you're repaying money you received in 2024, open your 2024 tax return).
- Select Save As in Windows or Copy in Mac to save a copy of the return. This is the form you'll be working in for this part.
- Select Forms in the upper-right corner.
- Select Form 1040 from the list to open the form (or Form 1040-SR, if applicable).
- Find the Total Tax line and make a note of this number.
- Adjust the income you originally reported by subtracting the amount you repaid. For example, if you reported $50,000 in income, but had to repay $9,000, you'll adjust the income to $41,000.
- After you enter the updated income, TurboTax will automatically calculate your updated tax liability. To determine your Claim of Right Credit, subtract the amount of the updated tax liability from the original tax liability.
To apply the credit:
- Return to the current tax year (the credit can only be applied using the Forms mode in TurboTax Desktop).
- Select Forms.
- Choose 1040/1040SR Wks from the list and the worksheet will appear.
- Scroll to the Other Credits and Payments Smart Worksheet (you can find this in a box near the end of the worksheet).
- Enter the credit amount you calculated on Line D, Claim of Right, IRC 1341 credit for repayments of prior-year income.
- Select the Step-by-Step or Easy Step icon to return to the interview mode and finish working on your tax return.
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