I plan to claim a tax credit on IRC 1341 due to an overpayment of my pension plan in 2012 and 2013. As I am in a lower tax bracket in 2014 than I was in 2012/2013, the credit for the actual taxes that I paid on the overpaid benefits is higher than the tax savings generated by taking a deduction in 2014. The plan sponsor is also demanding interest (@ the assumed ROA for the plan of 7%). I understand that they need the interest to make the plan whole but I don't feel like I should be the one paying it as the overpayment was a result of mistakes by the company and the plan sponsor, not me. In the event that I am forced to pay the interest, can I at least deduct it on my Schedule A while claiming the credit for the actual overpayments? The interest is > $3k.