What is a Recovery Rebate Tax Credit?

With all the information covering the stimulus checks and payments you may have heard the phrase Recovery Rebate Credit thrown around and are wondering, “what is the Recovery Rebate Credit?” or “Do I qualify for the Recovery Rebate Credit?” 

Don’t worry about knowing answers to these questions. We have you covered and are here to share some information regarding Recovery Rebate Credits so you can feel more informed and possibly save money on your 2020 or 2021 taxes.

What is a Recovery Rebate Credit?

The Recovery Rebate Credit is a credit that was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. So, if you were eligible for an Economic Impact Payment (EIP), commonly referred to as a stimulus payment, but did not receive one or you received less than the full amount as an advanced payment in 2020 then you can claim the Recovery Rebate Credit on your 2020 tax return. For payments made in 2021, you can claim the Recovery Rebate Credit on your 2021 tax return. 

If you did not receive a first or second stimulus check or received less than the full amount you may be eligible for the 2020 Recovery Rebate Credit (RRC). 

Generally, the credit can increase your refund amount or lower the taxes you may owe. When the IRS processes your 2020 tax return, if you are claiming the Recovery Rebate Credit, the IRS determines your eligibility and amount based on your 2020 tax return information. 

What does the Recovery Rebate Have to do With My Stimulus Payment? 

Depending on your filing status, your adjusted gross income in 2018 or 2019, and the number of dependents you have, you may have received the full amount of the first stimulus payment in 2020 ($1,200 single, $2,400 married filing jointly) plus $500 for each qualifying child and the full amount of the second stimulus payment ($600 single, $1,200 married filing jointly) plus $600 for each qualifying child. If that is the case, you do not need to complete any information on your 2020 taxes.

If you did not receive the full amount of the third stimulus payment in 2021 ($1,400 single, $2,800 married filing jointly) plus $1,400 for each qualifying dependent under the American Rescue Plan then you may be able to claim the Recovery Rebate Credit when you file your 2021 tax return. This is the return you will file in 2022. 

Do I qualify for a Recovery Rebate Tax Credit? 

Generally you are eligible to claim the Recovery Rebate Credit if you:

• Were a U.S. citizen or U.S. resident alien in 2020
• Were not claimed as a dependent
• Have a social security number valid for employment that is issued before the due date of your 2020 tax return.

You can take the Recovery Rebate Credit for any recovery rebate amount that is more than your stimulus payments you received in 2020 if you did not receive the full amounts.

The IRS figures out the amount of the Recovery Rebate Credit similar to how they calculated your stimulus payment, except your credit eligibility and the amount of the credit are based on new information from your 2020 tax return (that will be filed in 2021) instead of using your 2018 or 2019 information for the first and second stimulus. For the third stimulus payment, your credit will be based on information in your 2021 tax return (that will be filed in 2022). 

Some common possible reasons why the IRS corrected the credit amount are: 

• The taxpayer was claimed as a dependent on someone else’s 2020 tax return 
• The taxpayer did not provide a social security number that is valid for employment purposes
• The qualifying child was age 17 or older on January 1, 2020 
• A math error relating to the calculating adjusted gross income and any stimulus check amounts already received 

If there’s a mistake with the stimulus credit amount, the IRS will calculate the correct amount and make the correction and continue to process the tax return. If a correction is needed, this will cause a delay in processing the tax return and the IRS will send the taxpayer a letter or notice explaining any change. 

So, you may be able to claim the Recovery Rebate Credit for the first or second stimulus payments if one of the following applies to you: 

• Your 2020 Tax Information makes you eligible but you were not issued a stimulus check in 2020
• You are single, your adjusted gross income is less than $75,000 and your stimulus payment was less than $1,200
• You are married and filed jointly, your adjusted gross income is less than $150,000 and your stimulus payment was less than $2,400 
• Or if you didn’t receive $500 for each qualifying child 

Keep in mind that these amounts noted above phase out if your adjusted gross income for 2020 exceeds $150,000 if you are married filing a joint return, $112,500 if you are using the head of household filing status, or $75,000 if you are using single or any other filing status. 

For the third stimulus payment, you may be able to claim the Recovery Rebate Credit if one of the following applies to you: 

• Your 2021 Tax Information makes you eligible but you were not issued a stimulus check in 2021
• You are single, your adjusted gross income is less than $80,000 and your stimulus payment was less than $1,400
• You are married and filed jointly, your adjusted gross income is less than $160,000 and your stimulus payment was less than $2,800 
• Or if you didn’t receive $1400 for each qualifying child 

If I want to Claim the Recovery Rebate Credit What Information Will I Need?

If you didn’t receive the full stimulus payment and want to claim more in the form of a Recovery Rebate Credit on your 2020 taxes you will need the amount of stimulus payment you were issued in 2020. The IRS issued Notice 1444 and Notice 1444B that shows the amount you were issued before any offsets in 2020 so have that form in front of you when you sit down to do your taxes.

The IRS will send you Letter 6475, Your Third Economic Impact Payment: This letter will have the total amount of your stimulus payment in 2021 (just the third one, you received in 2021). This letter has all the info you need to report the correct amount of the third stimulus you received and understand if you are eligible for additional stimulus dollars and how much.

You should take care to NOT include any information regarding the first and second stimulus payments received in 2020, or the 2020 Recovery Rebate Credit, when completing your 2021 return. The Letter 6475 will help you accurately record the total amount of the third payment received to calculate the 2021 Recovery Rebate Credit.

I’m a College Student. Can I Claim the Recovery Rebate Credit?

If you meet the eligibility requirements and you are not claimed as a dependent on your parents’ 2020 taxes or anyone else’s then you can file a tax return and claim the Recovery Rebate Credit if you didn’t receive a stimulus payment. Many college students worked in 2020 to help make ends meet, whether it was for an employer or a side gig. If you had federal taxes withheld from your pay you may be able to get some of your withholding back in the form of a tax refund, claim education tax benefits, and boost your refund with the Recovery Rebate Credit.

Do I Claim the Recovery Rebate Credit for the Additional Stimulus I Didn’t Receive for My Dependents?

Yes, if you did not receive the additional $500 per qualifying child in your first stimulus check or the additional $600 per qualifying child in your second stimulus check, you can claim the additional stimulus amounts in the form of a Recovery Rebate Credit on your 2020 tax return. If you did not receive the additional $1,400 per qualifying in your third stimulus check, you can claim the additional stimulus amounts in the form of a Recovery Rebate Credit on your 2021 tax return (filed in 2022). 

TurboTax Has You Covered

Don’t worry about knowing these tax provisions. TurboTax has COVID-19 specific guidance to help you with impacts that happened this year and through coronavirus relief. TurboTax will ask you upfront if you received a stimulus payment and help you claim the Recovery Rebate Credit and other tax deductions and credits you’re eligible for based on your entries.

If you have questions, you can connect live via one-way video to a TurboTax Live tax expert with an average 12 years experience and get your tax questions answered. TurboTax Live tax experts are available in English and Spanish, year round and can also review, sign, and file your tax return or you can just hand over your taxes with TurboTax Live Full Service. All from the comfort of your home.

TurboTax will continue to keep you updated on coronavirus relief as more details and guidance come out. Be sure to check back with the TurboTax Blog and our TurboTax Coronavirus Tax Center for the latest information.