Social Security Repayment

[ThomasM125]

Yes, you can take a deduction in the current year for an overpayment associated with prior years, provided you determine the portion of that overpayment that was taxable in the prior year. You can also opt to take a credit  in the current year based on the excess taxes you paid in prior years on the social security income. You can't deduct a negative net social security benefit in the current year without reporting it as an itemized deduction, so that is why your tax is the same when you enter a negative net benefit or a benefit of $0. If you opt for a credit, you must refigure the tax for the year associated with the repayment to determine the credit to take in the current year. If you opt for an itemized deduction, you just deduct the overpayment amount in the current year. The repayment is called a claim of right.

To report a claim of right repayment credit in TurboTax follow these instructions:

1. Using the desktop version of TurboTax, bring up the "Forms" mode by clicking on that icon on the menu bar
2. Choose the 1040/1040SR Wks in the list of forms
3. Scroll down the 1040/1040SR Wks until you see Schedule 3, Part II - Other Payments and Refundable Credits
4. Enter the amount of the credit on line (D) Claim of Right, IRC 1341 credit for repayments of prior year income of the Other Credits and Payments Smart Worksheet 

You may need to amend your previous year tax return to determine the change in tax or the portion of the repayment that was taxable. You will see an option for this on your home page in TurboTax, under Your tax returns and documents at the bottom of the page. You will not file the amended return, you just need to remove the income that was paid back to determine the tax you paid on it. It will be the difference in tax due or refunded when you remove the income you paid back.

You can download your online TurboTax program to your computer so you don't have to re-enter all of your information. You will see an option for that on your left menu bar while working on your program in TurboTax. Look for the Tax Tools menu option, then Tools, then see the option on the right to  Save your (year) return to your computer.

Income repayment of less than $3,000 can only be deducted as a miscellaneous itemized deduction, which is not allowed for tax years beginning after 2017 through 2025. If the amount is over $3,000, it is entered on line 16 of Schedule A (Itemized Deductions) as an Other Deduction if you want to take the deduction in the current year, as opposed to the credit. You can bring up Schedule A in the desktop version of TurboTax and make the entry directly on the form by using the Open Form menu icon.

@jtricomi 

@jtricomi [Edited 1/23/26 at 6:17 AM PST]