If you are able to claim a miscellaneous deduction for the repayment on your federal taxes, you can do the same for your state income taxes.
How you enter this deduction in the program depends on the amount of the repayment and what state return you are filing (enter this information as a "Reply" and I will provide specific instructions).
If both the overpayment and your repayment occurred in the same tax year (and DFAS won't issue a corrected Form W-2), you can "back out" the repayment in the following manner:
- Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
- Continue to the screen "Other Taxable Income". Enter the description as "2017 Debt Repayment DFAS" and the amount as a negative number. These are NOT wages.
A corresponding negative amount will be entered, on line 21. This will reduce your taxable income by the amount of the overpayment and potentially result in a full refund of the income tax withheld on that overpayment.
(Depending on how much the overpayment was, you may want to take the time to file a claim for overpayment of Social Security and Medicare Tax withheld. That is done through the Social Security Administration.. See: Can I get a refund for excess Social Security tax withheld?)
