Are Social Security Disability Repayments Tax Deductible?

[achampie]

Are Social Security Disability Repayments Tax Deductible, so far  $4,500 Repaid in 2017?

Due to Over payments.

[Critter]

Are you still receiving SSDI  in 2017?   Was this a repayment of 2017 benefits or another tax year ?

[achampie]

Not anymore.

Since it stopped earlier this year, the last 2 are Yes to both this year and for previous years of 2014-16.

Told them twice in 2013 and in 2015, that I was returning to work  and had returned to work in 2014 and nothing was done. Naturally, my fault for their ignoring it and/or being incompetent.

[Hal_Al · Accepted solution]

(Edited per TaxGuyBill's comment)

Repayments of Social Security follows a slightly different rule than other repayments.

If you properly receive Social Security payments for the current year, the repayment is subtracted from what you receive.  So if you received $8000 of Social Security but need to repay $4000, then $4000 is reported on the tax return, and you don't need to deal with the credit or deduction (enter the entire SSA-1099 form, and TurboTax should do that part).
https://www.irs.gov/publications/p915#en_US_2016_publink100097877

If the repayments are more than the amount you receive, then the 'extra' amount of repayment is subject to the 'usual' Repayment rules.

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REPAYMENTS

If you repay income that you were previously taxed on there is a way to recover the tax previously paid.

This situation is  described in IRS Publication 525. pgs 34-35.  You can take a  misc itemized deduction, on line 28 of schedule A (not subject to the 2% of AGI threshold) Or you can take a credit. The credit is computed by refiguring the tax return from the previous year as if the income had not been received. Then the difference in tax is claimed as a credit on the current year's return.  In the forms mode (the forms mode is not available in the on-line versions of TurboTax[TT]), you can use the line 73 smart work sheet to enter the credit amount on line 73; select item D, claim of right under IRC 1341 for repayments. TT will  enter "I.R.C.1341" on the line next to box d on line 73 of form 1040. TT does not do the calculation or compare it to the alternate deduction.

So, the taxpayer  has the option of either claiming the credit or deducting the repayment as a miscellaneous itemized deduction, whichever provides the greater benefit. But, you cannot file an amended prior year return. If the amount is $3,000 or less, only the  miscellaneous itemized deduction is allowed and is subject to the 2% of AGI threshold; it goes on line 23 (instead of line 28) of schedule A.

https://www.irs.gov/publications/p17/ch12.html#en_US_2016_publink1000172015

[achampie]

It is more than $3,000 . Will they just keep the money, since I already paid those years taxes, when I file an Amended Return? Or, do I get a Check or a Credit to 2017's Tax Owed?

[Hal_Al]

You do not file an amended 2016 (or earlier year). You take a credit (or deduction) on your 2017 return.

[achampie]

Is the Deduction more than the Amended Credit? Just started Repayment in August.

[Hal_Al]

You're using the "AMENDED credit". Technically you do not amend a return. You claim a credit on the current year's return (the year you make the repayments). Effectively, that will give you the same result as  amending. The only way to know which is better is to do the calculations both ways and compare. But. a general rule is if you are in a higher tax bracket this year, than last year; the deduction is better. That assumes, you normally use itemized deductions and not the standard deduction.

[TaxGuyBill]

Repayments of Social Security follows a slightly different rule than other repayments, *IF* this pertains to you:

If you properly receive Social Security payments for the current year, the repayment is subtracted from what you receive.  So if you received $8000 of Social Security but need to repay $4000, then $4000 is reported on the tax return, and you don't need to deal with the credit or deduction (enter the entire SSA-1099 form, and TurboTax should do that part).
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p915#en_US_2016_publink100097877">https://www.irs.gov/publications/...>

If the repayments are more than the amount you receive, then the 'extra' amount of repayment is subject to the 'usual' rules that Hal_Al mentioned.