A Claim of Right Repayment is a deduction you can take in the current tax year if you’re required to pay back income in excess of $3,000 from a previous tax year that you thought you could keep. You reported and paid taxes on the money, not knowing you’d have to pay it back.
Examples of this type of income include: the repayment of signing bonuses, moving expenses, unemployment compensation, and other funds.
While you still have to repay the money, there are a couple of ways you can get a tax break by reporting the repayment on your current year tax return:
- Take a simple deduction of the repaid income from the current year’s income (this is the easiest option for taxpayers who itemize their deductions)
- Use TurboTax CD/Download to calculate the amount of tax you overpaid and take a refundable credit
- This is the more valuable option, though it requires a bit more work
Whichever option you choose, we’ll walk you through the steps.