1040-SR (Web-based) | How to Report Repayment of Prior Year Unemployment

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Last updated: Feb 14, 2024
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In the individual tax return, unemployment compensation is included in gross income reported on Form 1040. If the taxpayer received unemployment compensation during the year, they should have received Form 1099-G after the end of the year showing the amount they were paid.

Sometimes, taxpayers repay unemployment benefits due to them being later denied or due to them receiving more than they were entitled to. The amount repaid is entered separately from Form 1099-G. To enter the repaid unemployment compensation amount (for prior year), please note that:

If the taxpayer repaid unemployment compensation that had been included in income in an earlier year (other than current year), how the repayment is treated in the tax return depends on the amount.

  • If the amount repaid was $3,000 or less it cannot be deducted anywhere in the return.

  • If the amount repaid was more than $3,000 the taxpayer can either calculate a claim of right tax credit or include the repaid amount as an itemized deduction, whichever is most beneficial to them. See here for more information.

If the taxpayer had to repay more than $3,000 that was included in their income in an earlier year, the taxpayer may:

  • reduce their income, or

  • deduct the amount repaid under Other Itemized Deductions on Schedule A (Form 1040), or

  • take a refundable credit against tax.

Whether the repayment is deemed a reduction in income, an itemized deduction, or a tax credit depends upon the type of income.

Wages, taxable unemployment compensation, nonbusiness ordinary income

If the income exceeds $3,000 and was previously reported as wages, taxable unemployment compensation, or other nonbusiness ordinary income, the taxpayer can either include the repayment on Schedule A under Other Itemized Deductions or calculate a tax credit, whichever is more favorable. (For the tax credit, see the instructions below.)