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fagansa1
New Member

I received a court settlement refunding money we donated to a 501c3 charity over multiple tax years and was part of our itemized tax deductions. How do I now pay taxes?

 
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2 Replies

I received a court settlement refunding money we donated to a 501c3 charity over multiple tax years and was part of our itemized tax deductions. How do I now pay taxes?

It is entered back in to income on the Sch 1 line 8 as other income. 

rjs
Level 15
Level 15

I received a court settlement refunding money we donated to a 501c3 charity over multiple tax years and was part of our itemized tax deductions. How do I now pay taxes?

If charitable contributions that you deducted in earlier years were refunded to you in 2019, the refunded contributions are called an itemized deduction recovery. You report the refund as taxable income in the year that you received it, but you might not have to report the full amount as income. You report only the amount that actually reduced your tax in the earlier year. The calculation of the amount is complicated, and TurboTax will not do it for you. You have to do the calculation yourself outside of TurboTax, and enter in TurboTax the taxable amount that you calculated.


The rules for calculating the taxable amount that you have to report are in IRS Publication 525, pages 22 - 26, beginning with "Recoveries" at the bottom of page 22. (Page numbers are for the 2018 edition.) You can download Publication 525 from the IRS web site at the following link.


Publication 525, Taxable and Nontaxable Income


After you calculate the taxable amount that you have to report as income, you enter it in TurboTax. You should be able to get to the right place by entering "reimbursed deductions" (without the quotes) in the Search or Find box, then clicking the link that says "Jump to reimbursed deductions." For 2019, the taxable amount that you enter will be reported on Schedule 1 line 8.

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