Everything you need to know about the Recovery Rebate Credit

The Recovery Rebate Credit is back for our 2022 tax season. In this article, find out what it is, how it works, and how to get it.

Recovery Rebate Credit Background

Many of us are familiar with the 2020 recovery rebate credit because we were asked questions about the first and second COVID stimulus payments (economic impact payments) when we filed our 2020 tax return. 

That information was used to determine if you should have received more in stimulus payments based on our 2020 tax return. If you should have received more, then you picked that up as a Recovery Rebate Credit when you filed your 2020 tax return. 

We will see the Recovery Rebate Credit again for our 2021 tax return, filed in 2022, because of the third stimulus payment. 

How much should I have received as a third stimulus payment?

You should have received $1,400 per qualifying individual for this year’s third stimulus payment. 

Qualifying individuals include you, your spouse (if any), and qualifying dependents. You and your spouse generally have to be a U.S. citizen or U.S. resident alien and not be a dependent of someone else. Qualifying dependents include both qualifying children and qualifying relatives, which is more expansive than the first two rounds of economic impact payments.

If your annual income for the tax return that the stimulus was based on was above $75,000 as an individual filer, $112,500 as head of household, or $150,000 as Married Filing Jointly, you should have received less than the $1,400 per qualifying individual and if “too high” you should have received zero dollars. 

These payments were based on the 2020 or 2019 tax return. 

If your family situation or income changed during 2021, resulting in you receiving less, you will NOT owe money to the US Treasury for the difference. 

If your family situation or income changes so that you should have received more than you received in the third stimulus payment, you may pick up the difference when you file your 2021 tax return as the Recovery Rebate Credit. 

How do I get the Recovery Rebate Credit?

When filing your tax return, the software (or the instructions for paper filing) will ask you how much you received for the third stimulus payment. Make sure this number is accurate, otherwise it can cause a delay in the processing of our tax return. 

The best way to make sure the number is correct is to use IRS-provided information. 

You have several sources for that information: 

• You should have received Notice 1444-C regarding your third stimulus payment shortly before or shortly after your received payment. 
• In early 2022, the IRS will send out a Letter 6475 informing you of the amount you received for your third stimulus. 
• You can log into your tax account on IRS.gov and find the amount of the third stimulus payment there. 

IF your 2021 tax return, calculates you should have received more stimulus payment than you actually received, you’ll receive the Recovery Rebate Credit totaling up to the difference between what you should have received and what you did receive. 

Again, the reasons you may receive more stimulus would be if your income on your previous tax return was above the income levels noted above, but for 2021 our income lowered OR if you added qualifying individuals to your family in 2021. 

If someone else received the stimulus payment for a dependent you are now claiming for 2021, you are still eligible to receive the Recovery Rebate Credit for that qualifying dependent. 

Also, these stimulus payments were not taxable and do not need to be paid back. 

The only reason you are reporting the amounts of stimulus payments you received are to determine if you should have received more. 

You can find more information about the third stimulus payment here and about the Recovery Rebate Credit here.