What is the IRS Recovery Rebate Credit?

Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act signed in 2020, the Recovery Rebate Credit is a tax credit on your 2020 Individual tax return. If eligible, you received up to 2 Economic Impact Payments (EIP) that were an advance against the Recovery Rebate Credit. The amount of those payments was calculated based on your most recent tax return filed, which for the first round of EIP’s would have been the 2018 tax year and possibly, 2019 for the second round.

To qualify for the Recovery Rebate Credit in the year 2020 you:
– Must be a US Citizen or US resident alien
– Must have a valid Social Security Number
– Was not a dependent of another taxpayer

The amount of your credit is calculated based on your filing status, adjusted gross income (AGI), number of eligible qualifying children and the amounts of your EIP’s received. The amount of a full credit (if eligible) are as follows for each of the two EIP payments:

For the first EIP, up to:
– $2,400 for married, filing jointly or
– $1,200 for any other filing status, and
– $500 for each qualifying child under age 17 at the end of 2020

For the second EIP, up to:
– $1,200 for married, filing jointly or
– $600 for any other filing status and
– $600 for each qualifying child under 17 at the end of 2020

If the Economic Impact Payments you received were for the full amount you were eligible based upon your 2020 tax return then you do not qualify for any additional credit. If, based upon your completed 2020 tax return, your EIP was overpaid, this excess is yours to keep and does not need to be repaid.

However, if you payments were less than eligible, you will receive the remaining credit on your 2020 tax return.

The scope of this post is to provide an overview of the Recovery Rebate Credit and how it relates to CARES Act EIP payments. Please consult your tax preparer for your i