topic Claim of Right Repayment - For State Return using Credit in State tax filing

Claim of Right Repayment - For State Return using Credit

ZulfiH — Tue, 10 Mar 2026 06:42:19 GMT

Background

I had to return a portion of sign-on bonus to my previous employer (Claim of Right Repayment / IRS Pub 525).

Method 1: 'Claim of Right - Deduction' works both for Federal as well as State Tax Return.
Method 2: 'Claim of Right - Credit' works only on Federal return?

Question

How do I apply 'Claim of Right - Credit' for the state tax return?
Can I claim 'credit' for federal and 'deduction' for state on my taxes for claim of right repayment (by update Schedule A on the State Tax Return)?

Re: Claim of Right Repayment - For State Return using Credit

Mike9241 — Sat, 26 Nov 2022 05:28:33 GMT

what state? state tax laws can differ from federal

Re: Claim of Right Repayment - For State Return using Credit

Hal_Al — Wed, 30 Nov 2022 01:05:51 GMT

As Mike 9241 said, it depends on the state.

That said, if it is allowed it's almost certainly going to be separate from what you claimed on the federal return. Deduction only is the most likely scenario. If allowed it will come up in the state interview.

Re: Claim of Right Repayment - For State Return using Credit

ZulfiH1 — Sat, 26 Nov 2022 18:19:43 GMT

Thanks Mike. The state is Kentucky.

Re: Claim of Right Repayment - For State Return using Credit

ZulfiH1 — Sat, 26 Nov 2022 18:29:20 GMT

Thanks for responding Hal and Mike

IRS Pub 525, page 36 offers two methods for 'Claim of Right.

a) Deduction:

When I use this method, using TurboTax, on Federal Schedule 3, the data automatically transferred to my state tax return.

b) Credit:

When I use this method for Federal, the data does not reflect in State return. however, it results in a less Federal tax (and more refund)

So the question is: Is it permissible that I use 'Credit' method for Federal and 'Deduction' method for Sate (by directly updating KY state Schedule A) -- Technically, yes, TurboTax allows me without any error in the tax return. I could not find any rules in favor or against this. Hence, my question in this forum

Appreciate your time

Regards

Zulfi-

Re: Claim of Right Repayment - For State Return using Credit

Hal_Al — Sat, 26 Nov 2022 19:35:51 GMT

Q. Is it permissible that I use 'Credit' method for Federal and 'Deduction' method for Sate (by directly updating KY state Schedule A) ?

A. Yes.

Re: Claim of Right Repayment - For State Return using Credit

ZulfiH1 — Sat, 26 Nov 2022 19:52:28 GMT

Thank you. This is helpful.