What’s the Recovery Rebate Credit? | Kiplinger

picture of a happy woman holding money If you did n’t get a third base stimulation check – or you only got a overtone check – then you surely want to check out the recovery rebate tax credit when you ‘re working on your 2021 tax hark back. The recovery rebate tax credit and stimulation checks are joined at the hep. In fact, third stimulus checks (including “plus-up” payments) were simply advance payments of the credit. then, if the blend sum of your third stimulation check and any “ plus-up ” requital is less than your allow convalescence rebate credit amount, you may be able to get the remainder back on your 2021 tax return in the form of a larger tax refund or a lower tax poster. If your third gear stimulation assay exceeded the sum of the recognition, you do n’t have to repay the deviation. Either way, you win !Skip advert

This helps eligible Americans who either didn’t receive a third stimulus check or didn’t get the full amount. And, in some cases, tied a person who received the $ 1,400 third-round requital 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 2021 tax revert, make sure you at least check to see if you qualify for the recovery rabbet credit. If you do, go ahead and file precisely to claim the credit and get a refund ( even if the IRS has n’t processed your 2020 render however ) .

Eligibility for the Recovery Rebate Credit

The eligibility rules for the recovery rebate credit are basically the same as they were for third-round stimulation checks. The bad difference is that eligibility for the stimulation check was typically based on information found on your 2019 or 2020 tax tax return, while eligibility for the recovery rebate credit is based on information from your 2021 return. so, you could qualify for a stimulation arrest but not for the credit – and vice versa .Skip advert You ‘re generally eligible to claim the convalescence rebate credit if, in 2021, 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 (SSN) valid for employment that’s issued before the due date of your 2021 tax return (including extensions).

For marital couples filing a joint retort, if alone one spouse has a valid SSN, you can only claim up to $ 1,400 for the spouse with a valid SSN. If you ‘re claiming the extra $ 1,400 for a dependent, the dependent must besides have a valid SSN or borrowing taxpayer designation numeral ( ATIN ). generally, if neither you nor your spouse have a valid SSN, you can claim only up to $ 1,400 for each qualifying pendent claimed on your tax tax return. however, if either you or your spouse was an active member of the U.S. Armed Forces at any time during 2021, only one of you needs to have a valid SSN to receive up to $ 2,800, plus astir to $ 1,400 for each qualifying dependent .Skip advert A person who died in 2021 or 2022 can still claim the recovery rebate credit rating on his or her final tax reappearance prepared by a survive spouse or representative if the requirements listed above are satisfied .

How to Calculate the Recovery Rebate Credit

exchangeable to the eligibility rules, calculation of the 2021 recovery rebate credit is generally the same as the calculation of third-round stimulus checks, except that they ‘re based on information from different sources. third stimulation checks were generally based on information from either your 2019 or 2020 tax return, whichever was most recently filed when the IRS began processing your requital. If you did n’t file a render for either of those two years, the IRS sent a third stimulation check based on whatever information, if any, was available to it. In many cases, that information came from the Social Security Administration ( SSA ), Railroad Retirement Board, or Veterans Administration ( VA ) if you receive benefits from one of those union agencies. however, the amount of your recovery rebate credit is based entirely on information found on your 2021 tax return. ( Do n’t include any information regarding your first- or second-round stimulation checks or the 2020 recovery rebate recognition on your 2021 return ! ) As with the stimulation checks, calculating the amount of your convalescence rabbet credit rating starts with a “ base ” amount. For most people, the base come for the 2021 recognition is $ 1,400. For married couples filing a articulation tax return, the basis amount is $ 2,800 ( i, doubly the general basal amount ). then you add on $ 1,400 for each dependent claimed on your 2021 fall .Skip advert After adding up the basal sum and any extra sum for your dependents, you then need to determine if your recovery rebate credit is reduced because of your income. Your credit will be reduced – possibly to zero – if you select the single, marital filing individually, or a stipulate widow ( erbium ) file condition and have an adjusted megascopic income ( AGI ) above $ 75,000 on your 2021 tax render. If you file a articulation return with your spouse, your credit rating will start to shrink if your 2021 AGI is over $ 150,000. For people who claim the head-of-household filing condition, the tax credit is reduced if your AGI tops $ 112,500. Your accredit wholly disappears if your AGI is above $ 80,000 ( singles ), $ 120,000 ( head-of-household ), or $ 160,000 ( roast filers ). ultimately, after the credit is reduced ( if necessary ), you need to subtract the sum third-round stimulation discipline and “ plus-up ” payments you received last year from the credit measure. You report the concluding amount on Line 30 of your 2021 union income tax return ( form 1040 or Form 1040-SR ). The recovery rebate citation is a “ refundable ” credit, which means you ‘ll get a tax refund if the credit is larger than the tax that you would otherwise have to pay. ( “ Non-refundable ” credits will only take your tax bill down to zero – they wo n’t trigger a refund even if they ‘re more than the amount you owe. )Skip advert here ‘s an example of how the calculation works : Andrew and Becky reported an adjust megascopic income ( AGI ) of $ 152,000 on their 2020 return. They besides have one child, who is five years old. Since Andrew was furloughed from his job for separate of 2021, their 2021 AGI is only $ 120,000. Because their 2020 AGI was above the $ 150,000 phase-out brink for roast filers, their third base stimulation check was reduced by $ 840. It went from $ 4,200 ( $ 2,800 foundation amount + $ 1,400 for their child ) to $ 3,360. Since their 2021 AGI is below the phase-out doorsill for joint filers, their recover rabbet credit is n’t reduced. As a resultant role, after subtracting the amount of their third stimulation requital, the recovery rebate credit they report on Line 30 of their 2021 tax reelect is equal to $ 840 ( $ 4,200 – $ 3,360 = $ 840 ). There ‘s a page-long worksheet in the instructions for human body 1040 that you can use to calculate the come of your credit. Tax preparation software will run the numbers and calculate the credit .

Notice 1444-C, Letter 6475, and Online IRS Account

What if you forgot how much you received final class as a third stimulation check and/or “ plus-up ” requital ? There are four ways to get that data .Skip advert

beginning, the IRS should have sent you a notice after it sent your third base stimulation check – Notice 1444-C. The IRS besides sent branch notices to people who received a “ plus-up ” requital. You can find the proper total to calculate the convalescence rebate credit on these notices. If you received a joint payment with your spouse, the notice shows the sum amount of payments. If you and your spouse file classify 2021 tax returns, each of you must enter half of the total of the payment. Keep Notice 1444-C with your other tax records. The IRS is besides sending another notice – Letter 6475 –with the lapp information. The tax agency will be sending these letters through March 2022. If you received a joint stimulation requital with your spouse, Letter 6475 lone shows half of the total requital measure, and each spouse could receive their letter at different times. If you and your spouse are filing a joint 2021 tax rejoinder, include both amounts when calculating the recovery rebate credit. If you ‘re filing separate returns, each spouse should lone include their half of the stimulation payment sum. As with Notice 1444-C, save Letter 6475 with your tax records .Skip advert You can besides find the sum amount to subtract from the credit on your IRS on-line history, if you have one. The come of your one-third stimulation check is shown on the Tax Records yellow journalism under “ Economic Impact Payment Information. ” If you and your spouse received joint payments, each of you will need to sign into your own report to retrieve your distinguish stimulation requital amounts. ultimately, you can request a 2021 explanation transcript. You can request on-line or by mail through the IRS ‘s Get Transcript web page. You can besides call the IRS ‘s automated phone transcript serve at 800-908-9946 for it be sent by mail or submit Form 4506-T. If you received joint payments with your spouse, the transcript shows the sum amount of each payment under the chief taxpayer. If you file separate 2021 tax returns, each of you must enter half of measure of the payment .

Lost, Stolen or Destroyed Third Stimulus Checks

If your third stimulation determine was lost, stolen or destroyed, you can ask the IRS to do a “ requital trace ” to see if your check was cashed. If you file your 2021 tax revert before a hound is complete, do n’t include the requital amount on the recovery rebate citation worksheet. If you do, you may receive a notification from the IRS saying your accredit was changed. An allowance will be made after the trace is complete and it ‘s determine that your payment was n’t cashed. You wo n’t need to take any extra action to receive the recognition .Skip advert If you do n’t request a payment decipher, expect the IRS to reject any recovery rebate credit claimed on your 2021 return. Since the requital was issued to you, the IRS will consider you ineligible for the accredit. If your third gear stimulation payment was sent on a debit poster but you did n’t activate the menu before February 1, 2022, you should receive a letter from the IRS remind you to activate your card or to request a substitute if you accidently threw the card away .

Who Will Actually Get a Recovery Rebate Credit?

Most Americans already received the full come of the 2021 recovery rebate credit as a third stimulation check requital. For those people, subtracting the stimulation money they previously received will reduce their recovery rebate credit to zero. so, if you received a full third stimulation check, there ‘s no indigence to complete the worksheet to calculate the credit. however, certain groups of people could very well end up with a positive recognition sum, which will result in a lower 2021 tax placard or larger tax refund. For case, assuming you ‘re eligible, you may be able to claim a convalescence rebate credit if :Skip advert

  • Your AGI was above the applicable phase-out threshold on your 2019 or 2020 tax return (whichever return was used to calculate your third stimulus check), but it’s lower on your 2021 tax return;
  • You added a dependent (e.g., had a new baby) in 2021;
  • You share custody of your child, your ex-spouse claimed the child as a dependent for the 2020 tax year, and you claim the child as a dependent for 2021;
  • You got married in 2021 (especially if there’s a wide gap between each spouse’s income);
  • You could be claimed as a dependent on someone’s 2019 or 2020 tax return (whichever return was used to calculate your third stimulus check), but not on anyone’s 2021 return;
  • You receive Social Security or veterans benefits, didn’t file a 2019 or 2020 tax return, and care for a dependent child, but the IRS didn’t get information about the child from the SSA or VA;
  • You didn’t have a SSN in 2021 but are issued one by the due date of your 2021 tax return (including requested extensions);
  • The IRS sent you a third stimulus check that was less than what you were entitled to receive; or
  • The IRS didn’t send you a third-round stimulus check at all.

Skip advert These are equitable a few of the more coarse reasons why you might be able to claim a convalescence rabbet accredit. There will be other situations that result in a cocksure credit total. That ‘s why it ‘s important that you run the numbers when you file your own 2021 tax refund. If you ‘re entitled to a refund, file your return electronically and sign up to have your refund directly deposited into your savings bank account to get your money the fastest. ( bill : If you reside in a U.S. territory, do n’t enter an sum on Line 30 of mannequin 1040 or Form 1040-SR. In general, the tax authorities in american english Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands will provide the recovery rabbet credit to eligible residents. )

Avoid Mistakes That Will Delay Your Refund

Simply claiming the recovery rebate credit wo n’t by itself delay the march of your tax return or any tax refund. however, mistakes on your render – including mistakes calculating the recovery rebate accredit – can slow things down and make you wait longer for your refund. fortunately, though, you wo n’t necessarily lose out on the credit if you make a error on Line 30 of your imprint 1040. The IRS wo n’t calculate your recovery rabbet credit or correct your entry if you enter $ 0 on Line 30 or leave it lacuna. The IRS will treat this as your decision not to claim the credit rating. however, if you make a mistake on the Line 30 sum ( $ 1 or more ), the IRS will calculate the decline amount of the credit, correct your tax return, and continue processing it.

The IRS wo n’t contact you before making a correction, and you wo n’t have to provide any extra data, but at least the IRS will send you a notice explaining any changes they make. This will besides delay the serve of your restitution. If you agree with the changes the IRS made, no answer or action is required. If you disagree, call the IRS at the toll-free number listed on the top correct corner of the notice .

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