How does Clawbacks work for taxes?
Let's say you had a $15K bonus that was 8K after taxes, and then it's clawbacked and you have to pay the full amount back. How does it work for taxes and all?
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The clawed back amount would reduce your taxable income through an itemized deduction.
I had a start bonus clawed back from my prior firm, and just went through this on my 2022 tax return.
So did you end up losing more money or did your tax refund cover the difference
It covered the difference, essentially just acts as a “tax shield”.
For example: your taxable income (before deduction) for 20xx year is $100k. After the itemized deduction of $15k for your clawback bonus, it is now a taxable income of $85k.
Let's say you get into higher numbers and it's now 90K clawback and that's reflective of a $45K take home. Still the same concept?
Yes should be same concept, it’ll be an itemized deduction instead of the standard deduction.
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Covers difference
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