How to adjust taxable income in year Social Security benefits were paid back

[mguinn59]

I was overpaid SS in 2021 and 2022 due to exceeding the earnings limit.   IRS is demanding repayment in 30 days.  I assume I will be able to adjust my 2024 taxable income by the amount of the repayment.   I normally take the standard deduction, so do I list this repayment as an adjustment on my Schedule 1 as 'other adjustments'?  

[ee-ea]

See this IRS info

https://www.irs.gov/publications/p915#en_US_2020_publink100097877

[mguinn59]

Providing a link to the SS website is not a particularly helpful response.

[AbrahamT]

When you receive your SSA payment in 2023 for the amount of the benefits that you received in that year, simply subtract the repayments that you owe for the prior years from the benefits received and include the final number as a net benefit as if it was the amount showing in Box 5 of your SSA form 5 on your tax return for 2023. If however the net benefits result in a negative figure, then none of those benefits will be taxable.   See HERE pg .5 under Subsection "Repayment of benefits."

and pg. 15 under Subsection " Repayment More Than  Gross Benefits." 

[mguinn59]

To be clear, I will make the repayment in 2024 for overpayments received in  2021 and 2022.   Am I allowed to adjust my taxable income on my 2023 tax return in the manner described?

[KrisD15]

There are 2 methods, a Deduction or a Credit.

You may take a deduction for the repayment if that repayment is 3,000 or more. This is reported on Schedule A, so you need to Itemize Deductions. 

You may take a credit which is basically "recapturing" the tax it cost you in those previous years on this year's tax return. This is a bit complicated. You need to recompute those previous year returns as if you never received that social security payment amount and compare the "new" tax liability to the old. (This is only a MOCK return to get the figures, you DO NOT amend or refile) 

This difference is your credit. 

The credit needs to be manually entered onto the tax form, so this method may only be used with TurboTax Desktop. 

Here is a link for further instructions