What is Recovery Rebate Credit?
Last year, thousands of people received their Recovery Rebate Credit through the form of economic Stimulus Payment. It is a one-time benefit to help people in the pandemic. However, not all have received the maximum amount possible. The good news is, you can reapply this year and see if you are now eligible.
Who can Avail the Recovery Rebate Credit?
For single Americans, the threshold for Recovery Rebate Credit is $75,000. If your AGI in 2018and 2019 tax years is $100,000, but in 2020 it becomes $50,000 below the threshold, you are now eligible for the benefit.
For all people, especially college students, who were claimed dependent by parents in 2018 and2019 but shifted and became independent in 2020, you are now eligible to claim the benefit if you are to apply your return for the 2020 tax year.
For parents who adopted or gave birth to a child, you are now qualified to get the RecoveryRebate Credit for the newest member of your family. He/she must be below 17 by December 31, 2020. If yes, then he/she shall be given $500 in the first round, then $600 in the second round of stimulus payments.
How to Claim the Recovery Rebate Credit on Your 2020 Tax Return?
To claim your recovery rebate credit on your 2020 tax return, follow these steps:
- File your Recovery Rebate Worksheet together with your 2020 federal tax return. If you file through tax preparation software, the software itself will guide you through your worksheet.
- Input how many stimulus payments you have received for both rounds. The IRS mailed this amount on your Notice 1444 for the first round and Notice 14440B for the second round. Find it here.
- If you did not receive the entire payment for one or both rounds, you will be asked about your income. For single people, the threshold is $75,000 and $150,000 for married couples. If your AGI for the year 2020 is below these values, then you are qualified to have an additional payment. If not, you will be asked to decrease your income by 5% to know your partial payment amount.
- After calculating and determining your additional or partial stimulus payment, report the amount on Line 30 of your 2020 federal tax return.
References
Mengle, R. (17 February 2021). What’s the Recovery Rebate Credit?. Retrieved February 24, 2021, from https://www.kiplinger.com/taxes/602269/what-is-the-recovery-rebate-credit
