Can i deduct the repayment of a sign on bonus?

[lv4stooges]

I received a sign on bonus of $7500 after tax and when I left I had to pay back 6300.  Can I deduct this off my taxes?

[bwa · Accepted solution]

If you repaid amounts reported as income in the prior year -

·         if the amount is $3,000 or less, it is a miscellaneous itemized deduction subject to the 2%  limitation.  Turbotax explains the 2% rule at this site.

• if the amount is more than $3,000, it is a miscellaneous itemized deduction which is not subject to the 2% limitation.

If the amount was received under a "claim of right" (you had unrestricted use of the funds but later found out you didn't), you have one more choice:  if the amount is more than $3,000, you can choose instead to claim a credit for the additional tax incurred by reporting the repaid amount in income. See IRS Publication 525 for an explanation of that method. Look under deductions and credits, then other deductible expenses, then less common expenses if the amount is under $3,000.

TurboTax on-line does not support the "claim of right" computation. TurboTax desktop, in the forms mode, permits the credit to be entered in the "smart worksheet" above line 72, but you still would need to compute it manually.