I just changed jobs. When I left my job, I was asked to pay back my entire signing bonus and relocation bonus they paid me last year.
Can I use this amount as a loss to reduce my taxable income when my file my taxes next year? If yes, I'd really appreciate it if you could tell me how?
Thanks, Arvind
Yes. See Repayments in publication 525.
It seems to me that the repayment should go in Other Income as a negative number when your standard deduction without the deduction for the repaid amount is larger than your itemized deduction, because if you put it on Schedule A you may no (or only a partial benefit) from deducting in on line 28 of Schedule A. The publication does not say that you can do this, but maybe they're wrong because it discriminates against lower income taxpayers.
If you owe more than 3k, you can either deduct or take a credit. The credit equals to the difference between what the prior year tax was originally or would have been were it not for the bonus. This way seems fair and straightforward. According to the publication, the credit goes on line 70.
However, there is the issue of social security and medicare tax. If you got 10k, they may have withheld 7.65% or $765. Provided you did not claim a credit for excess social security tax paid (line 67) in the prior year, you should get all of this $765 back. The IRS publication also does not say that you can do this, but it seems reasonable to me and I imagine the amount would go on line 70.
See Repayments starting on page 33 of Publication 525.
Condor
Yes. See "Repayments" on page 33 of IRS Publication 525.
No. The line 28 statement is in a section for repayments over 3000.
Line 23 is for repayemnts less than 3000.
What's the reason for the different rules. It seems the rules are unfair to those with lower incomes.
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