Recovery Rebate Credit: What You Need to Know
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 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, 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.
Generally, the credit can increase your refund amount or lower the taxes you may owe.
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 500 for each qualifying child. If that is the case, you do not need to complete any information on your 2020 taxes.
If you didn’t receive a full stimulus payment then you can claim the Recovery Rebate Credit for any recovery rebate amount that is more than the stimulus payment you received. This also means you may be able to increase your tax refund or lower what you owe.
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 the 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.
So, you may be able to claim the Recovery Rebate Credit 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.
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 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.
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.
How Do I Claim Recovery Rebate Credit
Consult with your tax advisor on your 2020 tax return. Get in touch with GT Tax & Accounting for your 2020 tax preparation needs!