If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it.
Method 1 — Deduction
Figure your tax for 20YY claiming a deduction for the repaid amount. If you deduct it as an other itemized deduction, enter it on Schedule A (Form 1040), line 16.
Method 2 — Credit
Figure your tax for 20YY claiming a credit for the repaid amount. Follow these steps:
Figure your tax for 20YYwithout deducting the repaid amount.
Refigure your tax from the earlier year without including in income the amount you repaid in 20YY.
Subtract the tax in step (2) from the tax shown on your return for the earlier year. This is the credit.
Subtract the amount in step (3) from the tax for 20YY figured without the deduction (step 1).
If Method 1 results in less tax, deduct the amount repaid. If Method 2 results in less tax, claim the credit figured in step (3) on Schedule 3 (Form 1040), line 13b, by adding the amount of the credit to any other credits on this line. See the Schedule 3 instructions for details.
To enter the credit into the TaxAct program, follow the steps below.
Online
Dashboard
From within your TaxAct return, click Resources.
On smaller devices, click the menu at the top left corner of your screen, then make your selection.
Under My Return, click Federal Search.
Click the Miscellaneous Topicsdrop-down, then click Credit for repayment (I.R.C. 1341).
Complete the rest of the interview process.
Classic
From within your TaxAct return, click Federal.
On smaller devices, click the menu at the top left corner of your screen, then make your selection.
Click the Miscellaneous Topicsdrop-down, then click Credit for repayment (I.R.C. 1341).
Complete the rest of the interview process.
Desktop
From within your TaxAct return, click Federal.
Click the Miscellaneous Topicsdrop-down, then click Credit for repayment (I.R.C. 1341).