There’s a new tax credit showing up on the Form 1040 this year: The Recovery Rebate Credit. If you didn’t get a stimulus check – or you only got a partial check – then you certainly want to make sure you check out the credit before you file your 2020 tax return.
- How Filing Your Tax Return Early (or Late) Could Boost Your Third Stimulus Check
The recovery rebate tax credit and stimulus checks are joined at the hip. Both the first ($1,200) and second ($600) stimulus checks were simply advance payments of the credit. So, if the combined total of your two stimulus checks (i.e., advance payments) is less than the recovery rebate credit amount, you may be able to get the difference back on your 2020 tax return in the form of a larger tax refund or a lower tax bill. If your stimulus checks exceeded the amount of the credit, you don’t have to repay the difference. Either way, you win!
This helps eligible Americans who either didn’t receive a stimulus check or didn’t get the full amount. And, in some cases, even a person who received both a $1,200 first-round stimulus check and a $600 second-round stimulus payment can claim a recovery rebate credit that boosts their refund or reduces the tax they owe. So, even if you’re not required to file a 2020 tax return, make sure you at least check to see if you qualify for a recovery rebate credit. If you do, go ahead and file just to claim the credit and get a refund.
Eligibility for the Recovery Rebate Credit
The eligibility rules for the recovery rebate credit are basically the same as they were for the first- and second-round stimulus checks. The big difference is that eligibility for the stimulus checks was typically based on information found on your 2019 tax return (or your 2018 return for first-round checks), while eligibility for the recovery rebate credit is based on information from your 2020 return. So, you could qualify for a stimulus check but not for the credit – and vice versa.
You’re generally eligible to claim the recovery rebate credit if, in 2020, you:
- Were a U.S. citizen or U.S. resident alien;
- Can’t be claimed as a dependent on another person’s tax return; and
- Have a Social Security number valid for employment that’s issued before the due date of your 2020 tax return (including extensions).
- Third Stimulus Check Calculator
A person who died in 2020 can still claim the recovery rebate credit on his or her final tax return prepared by a surviving spouse or representative if the requirements listed above are satisfied.
How to Calculate the Recovery Rebate Credit
Similar to the eligibility rules, calculation of the recovery rebate credit is generally the same as the calculation of stimulus checks, except that they’re based on information from different sources. The first stimulus checks were based on information from either your 2018 or 2019 tax return, whichever was most recently filed when the IRS began processing your return. If you didn’t file a return for either of those two years, you could send the IRS the necessary information through an online portal. If you received benefits from the Social Security Administration (SSA), Railroad Retirement Board, or Department of Veterans Affairs (VA), the IRS got the information it needed from those other government agencies. Second-round stimulus checks were based on either your 2019 return, information previously obtained through the IRS’s non-filers online portal, or information received from another government agency. However, the amount of your recovery rebate credit is based entirely on information found on your 2020 tax return.
- The Current Plan for a $1,400 Third Stimulus Check
As with the stimulus checks, calculating the amount of your recovery rebate credit starts with a “base” amount. For most people, the base amount is $1,800 – that’s the combined total of the first stimulus check base amount ($1,200) and the second stimulus check base amount ($600). For married couples filing a joint 2020 tax return, the base amount is $3,600 (i.e., twice the general base amount).