Claim of Right (Section 1341) Calculator 2026 — Wage Repayment Tax Relief
Calculate Section 1341 tax relief on repaid wages, bonuses or clawbacks. Compare Method A deduction vs Method B credit — automatically recommends whichever saves more.
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Amount repaid / clawed back this year
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From your prior year Form 1040 line 24
Method A vs Method B Comparison
| Item | Method A (Deduction) | Method B (Credit) |
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How Section 1341 Claim of Right Relief Works
When you repay income over $3,000 that you reported in a prior year, Section 1341 gives you a choice of two relief methods:
Method A — Current Year Deduction
Tax savings = Repayment × Current Year Marginal Rate
Works best when: current year rate ≥ prior year rate
Works best when: current year rate ≥ prior year rate
Method B — Prior Year Tax Credit
Credit = Prior year tax WITH income − Prior year tax WITHOUT income
Works best when: prior year rate was higher, or you had AMT in prior year
Works best when: prior year rate was higher, or you had AMT in prior year
Example: Bonus clawback of $50,000. Prior year AGI $230K (37% bracket). Current year AGI $180K (32% bracket).
Method A: $50K × 32% = $16,000 tax savings
Method B: Prior tax recalculated WITHOUT $50K income saves $18,500
Recommendation: Method B saves $2,500 more
Method A: $50K × 32% = $16,000 tax savings
Method B: Prior tax recalculated WITHOUT $50K income saves $18,500
Recommendation: Method B saves $2,500 more
Extended
Prior-Year Full Return Recomputation Engine
Reconstruct your prior year return without the clawed-back income — exact Method B credit calculation with bar chart
Enter your full prior-year return details to compute the exact Method B credit. This reconstructs your prior-year tax without the clawed-back income.
Prior Year Full Return Details
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Tax Relief Comparison Chart
Method A (Deduction) Method B (Credit) No Relief
Prior Year Tax Recomputation Table
| Line Item | Original (With Repaid Income) | Recomputed (Without Repaid Income) | Difference |
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Frequently Asked Questions
What is the Claim of Right doctrine and Section 1341?
Under the Claim of Right doctrine, you report income when received, even if you might repay it later. Section 1341 provides relief when you repay amounts previously included in income under a claim of right. If the repayment exceeds $3,000, you may either deduct it in the year of repayment OR claim a tax credit equal to the prior year tax savings — whichever gives you more relief.
What is the difference between Method A and Method B?
Method A (deduction): Deduct the repayment amount in the current tax year, reducing current taxable income. Best when current marginal rate is higher than prior year. Method B (credit): Compute your prior year tax with and without the income you repaid. The credit equals the reduction in prior year tax. Best when prior year rate was higher or you had fewer deductions then.
Does Section 1341 apply to all repayments?
Section 1341 requires three conditions: (1) you included an item in gross income in a prior year, (2) you held it under a claim of right — believing you were entitled to it, (3) you repay it in the current year. Common scenarios include clawed-back bonuses, returned wages after company restatements, fraud disgorgement, and executive compensation clawbacks under Sarbanes-Oxley or Dodd-Frank.
What if my repayment is under $3,000?
If the repayment is $3,000 or less, Section 1341 does not apply. You simply take a miscellaneous itemized deduction, which is subject to the 2%-of-AGI floor and the current TCJA suspension of most miscellaneous deductions through 2025. For amounts above $3,000, Section 1341's two-method approach applies, and the deduction is allowed even if you take the standard deduction.
How do I claim Section 1341 relief on my tax return?
For Method A (deduction): report on Schedule A as an other itemized deduction, or as an above-the-line deduction if the income was from a trade or business. For Method B (credit): compute the credit and enter it on Form 1040, line 6 (other credits), noting "IRC 1341" with the credit amount. Attach a statement showing the computation of both methods and the choice made.