A recovery rebate credit is your way of getting missed stimulus money
Editor’s Note: This article was originally published on December 31, 2020.
Stimulus payments have been a critical lifeline for many Americans during the coronavirus crisis. But what if you didn’t receive the full amount due to life changes such as a new baby or lower income? Rest assured, there’s a way to solve this—in the form of a recovery rebate credit.
You might be wondering what exactly a recovery rebate credit is and what it has to do with your stimulus. You’re not alone—it’s not a common term.
The recovery rebate and your stimulus payments are actually one in the same. It’s just that the recovery rebate credit is paid as part of filing your return.
Note: This credit is also sometimes called stimulus reconciliation or in casual terms, stimulus backpay or refund recovery credit.
Already know all about this credit? Find out how H&R Block can help you claim it.
Getting the additional stimulus money you need: How Block can help
When the stimulus payments were calculated in 2020, they were intended to be an advance credit on your 2020 return. To get the payments out quickly, the IRS used your most recent tax information to determine how much you should receive. For most, that calculation was spot on.
For some, the stimulus payments missed life changes that could have increased the total amount received—often, exactly when they need money the most. Sound familiar? Luckily, we can help close the stimulus gap.
You can rely on H&R Block’s expertise to help you claim any additional stimulus money you’re due through a recovery rebate credit.
See how the recovery rebate credit works
Scenario 1 – Recovery Rebate Credit and first-time filers
Shelly, a 2020 college graduate, didn’t receive any stimulus in the first round because she was claimed as a dependent on her parent’s 2019 return. However, she is no longer a student and doesn’t qualify as her parent’s dependent for 2020. When she files her own return for 2020, Shelly can claim the recovery rebate credit to receive the $1,200 for the first round of stimulus and $600 for the second round of stimulus.
Tip: If you’re a college student new to filing, check out our Student Tax Filing Guide for help with this year’s taxes.
Scenario 2 – Recovery Rebate Credit and unemployment
Tyler worked as an occupational therapist until March when he was furloughed for several months. During that time, he received some unemployment income but his overall 2020 income was less than his 2019. Based on his 2019 return, he received $950 for the first round and $475 for the second round of stimulus. When he files his 2020 return, the drop in his income means he’ll be eligible for an additional $375 ($250 for the first payment and $125 for the second).
Scenario 3 – Recovery Rebate Credit and a new baby
Jo and Nic married in January 2020 and had a baby in October 2020. They were both single on their 2019 returns, and they each received $1,200 in first round of stimulus checks in 2020. When they file their 2020 return, they will claim their child on the return and determine they should receive $1,100 in additional recovery rebate credit ($500 for round one plus $600 for round two).
Scenario 4 – Recovery Rebate Credit and a divorced couple
Gerri and Larry divorced early in 2020 and have no dependents. Based on their 2019 jointly filed return, they didn’t qualify for any stimulus due to Gerri’s income. When Larry files as Married Filing Separately in 2020, he only has $50,000 in gross income and qualifies for $1,200 with the first round of stimulus and $600 for the second round.
Who qualifies for a recovery rebate credit (stimulus backpay)?
The qualifications start with stimulus eligibility. For the first and second stimulus payments, that includes everyone except those:
- Who can be claimed as a dependent on someone else’s return;
- Without a valid SSN (The CAA has now retroactively made an exception for those who file MFJ and at least one spouse has an SSN, the spouse with an SSN is eligible to receive a stimulus payment)*;
- With AGI above the maximum phase-out;
- Estates and trusts.
*A qualifying child for the payments can have an SSN or ATIN
For single or married filing separately taxpayers, the credit is phased-out (or lowered) for those with AGI over $75,000.
For head of household filers, the phaseout begins with AGI over $112,500 and married filing jointly phaseout begins with AGI over $150,000.
If your eligibility or situation changed (such as a first-time filer), you might find that you’ll receive additional stimulus money. Check out the section below on how to claim the recovery rebate credit.
Here are few examples of eligible people who might have missed out on stimulus money (including the scenarios above):
- Families with birth or adoption
- Separated and divorced parents who alternate years to claim their children
- Some first-time filers, such as college students who are no longer dependents
- People who haven’t filed in a while
- People with a lower Adjusted Gross Income (AGI) in 2020
That last example—lower income—may describe you if you experienced unemployment, reduced hours or a job change in the last year.
While the additional stimulus money from the recovery rebate is good news, you should take note that the situations above can also affect your tax refund (or what you owe). We cover that information in our Top 5 coronavirus tax impacts article.
Concerned that the stimulus reconciliation will reduce your refund or that you’ll have to pay part of it back? Don’t worry, the IRS has stated that if you received too much, you won’t have to pay it back.
How do you claim the recovery rebate credit?
The recovery rebate credit should be included when you file your 2020 tax return. When you work with a tax pro or file with H&R Block Online, we’ll get you your maximum refund – guaranteed.
Want to find out how much you’ll get in the second round? Use our stimulus check calculator.
Early filers who claimed the wrong amount of Recovery Rebate Credit: You may have filed your 2020 return early and claimed additional Recovery Rebate Credit, but later received your second stimulus payment. If this describes your situation, you should not amend your return to correct the amount of Recovery Rebate Credit. The IRS will adjust these returns for you.
However, if you did not claim the Recovery Rebate Credit at all, meaning you had $0 on Line 30 of your return, then you would need to amend your return to claim the additional amount not received. The IRS will not adjust your Recovery Rebate Credit amount for you if your return had $0 on Line 30.
Let Block help you claim additional stimulus check money and more
Stimulus payments are just one thing triggering questions for taxpayers this year. With so much happening, it can be difficult to make sense of it all.
At H&R Block, we’re committed to keeping you informed. Check out our Coronavirus resource center for the latest on stimulus payments, tax impacts and more.
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If you made a contribution to a candidate or to a political party, campaign, or cause, you may be wondering if your political contributions are tax deductible. The answer is no – donations to political candidates are not tax deductible on your personal or business tax return. The same goes for campaign contributions.