Question about: Claim of right repayment over $3,000

[franco-valoppi]

I wasn't able to understand the deduction mentioned in the Help as "Claim of right repayment over $3,000".
It says something as if I paid more than $3000 last year, but I paid back this year, blah... Wasn't really able to understand if this applies to me.

Could you explain a bit better the concept behind it, so I understand if this applies to me or not?

Thanks!

[dave121]

I have this situation -- I had to repay in 2016 an overpayment that my employer made in 2015. I save more money by claiming the credit than by claiming the deduction.

Does anyone know how I can apply a credit to my Maryland state return? I can't find anyplace to enter it in TurboTax. Do I need to file an amended 2015 Maryland return?

[Saddie5]

I rent my house for a total of 15,600.00. It all went toward the mortage. Can I claim as repayment?

[Opus 17]

If you received income in a previous year that you were believed you were legitimately entitled to, and then had to pay it back in 2015, there are two methods to deduct that from your income.  If the amount was less than $3000, it is a misc deduction subject to the 2% rule, so many people will not benefit.

If the amount of repayment is more than $3000 you have two methods to deal with the repayment.  One is to deduct the income as a misc itemized deduction NOT subject to the 2% rule.  The other method is to figure out how much less income tax you would have owed in the year you received the income, and take that amount as a direct tax credit instead of a deduction.  If you earned over $50,000 and have more than $6200 (single) or $12,400 (joint) of itemized deduction, then both methods will have the same result.  But if you don't normally itemize your deductions, or if your income this year is much less than the year you got the income, then the direct credit may save you more money.  This is the claim of right credit.

[ksmtexas]

One caveat to Opus17, be mindful of changes in tax brackets. If you are in a lower bracket this year due to tax regulations then taking the credit will be more helpful than deducting income in mics itemized deduction.

[mmmed]

When I fill in the claim of right deduction over 3,000 in the "deductions and credits" section, turbotax online is populating an : Unemployment and paid family leave (1099-G) for the same amount in the income and expenses section. Is this a bug in the software?

Best,

MM

[Irene2805]

This issue will be resolved when the forms are finalized.  For current information on forms availability, please click on this link:  Federal forms availability

[taxpayer1040]

This issue still has not been fixed.  When will it be fixed?

[heybrian1]

Was this issue ever resolved in software?

[Critter-3]

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.
----- 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.  It is available at:  http://www.irs.gov/publications/p525/ar02.html#d0e9279

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" , but you still would need to compute it manually.

[austhokie]

i'm having this issue too - i had an overpayment of $4800 in 2020, that I paid back in 2021. I'm following the deductions guidelines but it keeps defaulting to unemployment taxes which is incorrect and then triggering me to enter a 1095A when my employer paid my health insurance

[AmyC]

I entered the deduction with no problem so let me tell you and show you what I did.

1. Go to Federal
2. to Deductions and Credits
3. Scroll down to Other Deductions and Credits
4. Select Other Deductible Expenses
5. Generation skipping, select NO
6. Less Common, select NO
7. Tell Us about your other expenses, fill in the amount you repaid in the second box where it says "Claim of right repayment over $3,000"
8. click Continue
9. Congratulations screen
10. click continue

@austhokie

[austhokie]

i did that and it shows under deductions and at the same time then a matching amount to that deduction gets added to my income in the form of an unemployment wage and shows as negative (so -4805) - if I delete it from the wages, then it removes the deduction that was added

[AmyC]

Thank you for clarifying. I have submitted it to the investigations team.

@austhokie

[richardggonzo]

Did you ever get a response on this?  I have the same issue in 2022 - i can enter but offsets on the unemployment line. 

Did you find another solution??

tia!