If a taxpayer did not receive an Economic Impact Payment in 2020, or received a payment for less than they were entitled to, they may be able to claim a credit on their 2020 tax return.
Who Qualifies for the Recovery Rebate Credit?
The Recovery Rebate Credit is figured like the 2020 Economic Impact Payment, except that the credit eligibility and the credit amount are based on the tax year 2020 information shown on 2020 tax returns filed in 2021.
Generally, taxpayers are eligible to claim the Recovery Rebate Credit if
- They were a U.S. citizen or U.S. resident alien in 2020,
- Are not a dependent of another taxpayer for tax year 2020, and
- Have a social security number valid for employment that is issued before the due date of their 2020 tax return (including extensions).
Taxpayers can take the Recovery Rebate Credit for any recovery rebate amount that is more than the Economic Impact Payment they received in 2020 by completing line 30 of 2020 Form 1040 or 1040-SR.
Taxpayers do not need to complete information about the Recovery Rebate Credit on their 2020 Form 1040 or 1040-SR if either of the following apply:
- They received $1,200 plus $500 for each qualifying child they had in 2020, or
- They are filing a joint return for 2020 and, together, the taxpayer and spouse received $2,400 plus $500 for each qualifying child they had in 2020.
For the purpose of the Recovery Rebate Credit, a qualifying child meets two tests:
- They are under age 17
- They otherwise qualify for the Child Tax Credit
The recovery rebate credit amount will be phased out when adjusted gross income for 2020 exceeds $150,000 for married filing joint returns, $112,500 for head of household returns, or $75,000 for any other filing status.
Because the Economic Impact Payment taxpayers received in 2020 was an advance of the recovery rebate, the worksheet provides a Recovery Rebate Credit to the extent the recovery rebate amount is more than the amount of the Economic Impact Payment received. If the taxpayer received an Economic Impact Payment that is greater than the Recovery Rebate Credit, they will not have to repay the difference. See here for more information.
How to figure the credit in the desktop program
When you create a new tax return in the 2020 desktop program, or pull a return forward from 2019 to 2020, you will be prompted with the following question:
Answer yes only if your client did not receive an economic stimulus payment in 2020, or if they received an amount less than $1,200 ($2,400 if married filing jointly) plus $500 for each qualifying dependent. The Recovery Rebate Credit Worksheet Menu will be displayed. Enter the amount of the Economic Impact/Stimulus Payment that the taxpayer(s) received in 2020 before any offsets. If the taxpayer(s) did not receive an Economic Impact/Stimulus Payment, enter $0.
- Payments, Estimates & EIC
- Recovery Rebate Credit
Returns containing a Recovery Rebate Credit will display the following diagnostic warning: