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I received a notification of repayment/refund data from my long-term disability insurance company. Does the taxable amount I returned in 2020 reduce my 2020 tax burden?

I returned an overpayment over $3000 to the insurance company in 2020, which was applicable to payments I received in 2019.  I don't know if I included this overpayment in my 2019 tax return.
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ee-ea
Level 15

I received a notification of repayment/refund data from my long-term disability insurance company. Does the taxable amount I returned in 2020 reduce my 2020 tax burden?

Repaid in 2020 goes into the 2020 return. See this from the IRS

https://www.irs.gov/publications/p525#en_US_2020_publink1000229600

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3 Replies
ee-ea
Level 15

I received a notification of repayment/refund data from my long-term disability insurance company. Does the taxable amount I returned in 2020 reduce my 2020 tax burden?

Repaid in 2020 goes into the 2020 return. See this from the IRS

https://www.irs.gov/publications/p525#en_US_2020_publink1000229600

I received a notification of repayment/refund data from my long-term disability insurance company. Does the taxable amount I returned in 2020 reduce my 2020 tax burden?

Thank you, this was very useful!

JamesG1
Expert Alumni

I received a notification of repayment/refund data from my long-term disability insurance company. Does the taxable amount I returned in 2020 reduce my 2020 tax burden?

Possibly.  What year or years did you pay the lump sum to the LTD insurer?  That year (or years), you are eligible for a repayment would create a Claim of Right issue.  The repayment credit or deduction would be reported on the current year's tax return.  Follow these steps:

  • Down the left side of the screen, click on Federal.
  • Across the top of the screen, click on Deductions & Credits.
  • Scroll to the bottom of the screen for Other Deductions & Credits.
  • Click on Other Deductible Expenses.
  • Continue until you see the screen that states Repayments of $3,000 or less or Repayments of $3,000 or more depending upon your situation. 

For repayments of $3,000 or more, you also have the option of reporting a credit but you have to re-compute your taxes for the tax year that you paid the income.  See this TurboTax Help.

 

 

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