Break off vs. break it off

It refers to the thing that's being broken off. Probably it's a relationship.

2 is correct I believe, if I understand the meaning you're trying to convey with this sentence.

I've decided to break (something you share/have with her) off with her.

'It' is the something you share with her--whatever it is.

1 isn't wrong if you're trying to say you've decided to break off (from something) with her. In other words, you're not breaking off from her but with her from something else.