Idaho State Tax Commission

Claim of Right Income Repayments

If you had to repay over $3,000 that you included in your taxable income in an earlier year, you may be able to claim a credit or deduction on your Idaho return.

You must have claimed a claim of right deduction or credit on your federal return under IRC section 1341.

Claim of Right credit

If you claimed a credit on your federal return, follow the instructions below to calculate your Idaho credit. If you claimed a federal deduction, see Claim of Right deduction, below. To calculate the credit, you'll need the following:

  • Idaho tax tables from the year the income was taxed.
  • Form 40 filers:
    • A copy of your Idaho tax return for the year the income was taxed, plus any amended returns or adjustment notices.
  • Form 43 filers:
    • A copy of your Idaho tax return for the year the income was taxed, plus any amended returns or adjustment notices.
    • A blank Form 43 for the year the income was taxed. You must complete the Form 43 for the year the income was taxed and reduce your Idaho and federal income by the repaid amount. This is the only difference between this return and the return you filed (including amendments or adjustments). Your Idaho percentage will likely change. Don't adjust any other items on the return, but recalculate amounts using the revised Idaho percentage. Complete the return through line 42. Don't file this return. Use this return only for the purpose of calculating the claim of right credit.

If you repaid income from more than one tax year, complete a separate credit worksheet for each tax year to determine the credit for each tax year. Then claim the total of all credits on your return the year you made the repayment.

Claim of Right credit worksheet

(1) Enter your Idaho taxable income, as amended or adjusted, for the year the income was taxed: Form 40, line 19.
Form 43 filers, skip to line 4.
(2) Enter the amount of income you repaid in the tax year for which you're calculating the credit.
(3) Line 1 minus line 2. This is your Idaho taxable income without the repaid income.
(4) Enter your Idaho tax before credits from the return you filed, as amended or adjusted: Form 40, line 21 or Form 43, line 42.
(5) Form 40 filers — Enter the tax from the tax tables for the Idaho taxable income on line 3. Use the tables from the year the income was taxed. This is what your Idaho tax before credits would have been without the income you repaid.
Form 43 filers — Enter your Idaho tax before credits from the return without the income that was repaid: Form 43, line 42.
(6) Line 4 minus line 5. This is your Idaho claim of right credit.

The amount from line 6 is included on the Claim of Right credit line on Form 40, line 48 or Form 43, line 68.

Don't include this worksheet with your Idaho return. Keep it with your tax records.

Claim of Right deduction

If you claimed a federal deduction for the repayment on your federal return, you have a choice of how to claim it on your Idaho return. The federal deduction can flow through to your Idaho return or you may claim the credit instead. You can choose the option that benefits you the most. If you let the federal deduction flow through, you don't need to do anything further on your Idaho return.

If the credit results in less tax, you can claim the Idaho credit. If you choose to take the Idaho credit, you must add back the federal deduction on your Idaho return.

To see which option is best, first calculate your credit on the credit worksheet. Then, if required, complete the addition worksheet below. Finally, complete the deduction worksheet for your form type.

Federal deduction add-back

The addition on your Idaho return is generally equal to the deduction on your federal return. If you claimed the federal deduction on Schedule A, your addition may be less.

Use the worksheet below to figure the Idaho addition required when taking the claim of right deduction on federal Schedule A and the claim of right credit on your Idaho return. Unless otherwise stated, all references are to the tax year when you repaid the income.

Worksheet for federal deduction add-back — Schedule A

(1) Form 40 filers — Enter your net Idaho itemized deductions from line 15.
Form 43 filers — Enter your net Idaho itemized deductions from line 35.
(2) Enter the federal deduction for claim of right included on federal Schedule A, line 28.
(3) Line 1 minus line 2. This is your Idaho itemized deductions without the claim of right deduction.
(4) Enter your Idaho standard deduction: Form 40, line 16 or Form 43, line 36.
(5) Is line 3 larger than line 4? If yes, enter zero. If no, enter line 4 minus line 3.
(6) Line 2 minus line 5. This is your Idaho addition if you take the Idaho claim of right credit instead of allowing the deduction to flow through.
  • Form 40 filers, enter the amount from line 6 as an "Other Addition" on Form 39R, Part A, line 6.
  • Form 43 filers, subtract the amount on line 6 from the total on Form 43, line 33.

Don't include this worksheet with your Idaho return. Keep it with your tax records.

Deduction comparison worksheets

If you claimed a deduction on your federal return for your repayment, use the appropriate worksheet below depending on the type of form you're filing for the year of the repayment.

The worksheet will show if you benefit more from allowing the federal deduction to flow through or claiming the credit for Idaho. Unless otherwise stated, all references are to the tax year when you repaid the income.

Deduction worksheet for Form 40 filers

Complete your Idaho Form 40 through line 19 (for the tax year the repayment was made), allowing the federal deduction to flow through to your Idaho return, and then complete this worksheet.

(1) Enter your Idaho taxable income from Form 40, line 19.
(2) If you completed the add-back worksheet, enter the amount from line 6 of the worksheet. Otherwise, enter the amount of the claim of right deduction from your federal return.
(3) Add lines 1 and 2. This is your Idaho taxable income with the required addition when claiming the credit.
(4) Calculate the tax using the tax tables for the taxable income on line 3. Be sure to use the tax tables for the year you repaid the income.
(5) Enter the claim of right credit from line 6 of the credit worksheet.
(6) Line 4 minus line 5. This is your Idaho tax before credits minus the claim of right credit.
(7) Calculate the tax for the Idaho taxable income on line 1. This is your Idaho tax before credits with the deduction.

Compare lines 6 and 7.

  • If line 7 is the same or less than line 6, don't claim the credit on the Idaho return. Instead, allow the deduction claimed on the federal return to flow through to your Idaho return.
  • If line 7 is more than line 6, claim the Idaho claim of right credit. Remember, you must add back the federal deduction to claim the credit.
    If line 7 is more than line 6, the amount from line 2 is included as an "Other Addition" on Form 39R, Part A, line 6. The amount from line 5 is included on the Claim of Right credit line on Form 40, line 48.

Don't include this worksheet with your Idaho return. Keep it with your tax records.

Deduction worksheet for Form 43 filers

Complete two Idaho Form 43 tax returns for the year you repaid the income. On the first return, add back the federal amount deducted or the amount from line 6 of the add-back worksheet.

If your federal deduction is claimed on Schedule A, the Idaho addition is included on Form 43, line 33. If your federal deduction is claimed elsewhere on the federal return, your addition is entered on Form 39NR, Part A, line 4, with the amount of the deduction claimed in each column. Complete the return to the Idaho tax before credits line (Form 43, line 42).

On the second return, allow the federal deduction to flow through to Idaho and complete the return to the Idaho tax before credits line.

(1) Enter the amount from the tax before credits line from the first return. This is your Idaho tax before credits after adding back the federal deduction.
(2) Enter the claim of right credit from line 6 of the credit worksheet.
(3) Line 1 minus line 2. This is your Idaho tax before credits minus the claim of right credit.
(4) Enter the amount from the tax before credits line from the second return. This is your Idaho tax before credits allowing the deduction to flow through.

Compare lines 3 and 4.

  • If line 4 is the same or less than line 3, don't claim the credit on the Idaho return. Instead, allow the deduction claimed on the federal return to flow through to your Idaho return.
  • If line 4 is more than line 3, claim the Idaho claim of right credit. Remember, you must add back the federal deduction to claim the credit.

Don't include this worksheet with your Idaho return. Keep it with your tax records.

Oct. 23, 2015

This information is for general guidance only. Tax laws are complex and change regularly. We can't cover every circumstance in our guides. This guidance may not apply to your situation. Please contact us with any questions. We work to provide current and accurate information. But some information could have technical inaccuracies or typographical errors. If there's a conflict between current tax law and this information, current tax law will govern.