Repayment of overpaid disability benefits

[neilbrink]

Client was overpaid $6746 in 2012 by an insurance company for disability benefits and paid them back in 2013. He has a letter from the company that is a "Claim of right" letter that allows him "to either claim credit on your current income tax return for taxes paid on your prior income tax return or, take a deduction on your current income tax return." On what line do we claim the tax credit? Line 53, Other credits?

[Pacun]

I would take on Sch A or the same line where he reported that income the previous year.

[Jack from Ohio]

It has been my experience that taking the deduction of the taxes paid on the amount repaid is much better.

[Cathy]

Refer to Publication 525 under "Repayments"....."Method 1 or Method 2". It lists the two options you have, depending on the amount of the repayment.