What to Know About the Recovery Rebate Tax Credit for 2020

To help offset the financial impact of COVID-19 for individuals across America, the U.S. government issued economic relief payments worth $1,200 per adult in each household, plus $500 for each additional qualifying dependent. Your eligibility to receive a payment was based on household AGI. The IRS looked at your 2018 and 2019 tax returns to determine whether you qualified for a check at the time of distribution.  

The IRS hasn’t officially released the new federal Form 1040 that taxpayers will file in 2020, but they are sharing a draft of what it is expected to include.  

According to the draft, a new line has been added for a “Recovery Rebate Credit.” This is where taxpayers who did not get the payments or should have received larger payments (due to birth of child or changes in income) will enter the additional amount due. This amount will be treated as a refundable credit.  

Who qualifies for the Recovery Rebate tax credit? 

Some people may have experienced a change in situation since the economic relief payments were issued (due to a decrease in income or the birth of a child in 2020, for example). If this is your case, the IRS should be able to calculate whether you are eligible now and how much of the credit may be due simply based on your 2020 federal tax return (the return you will file in 2021).  

Note: TaxSlayer will automatically calculate the Recovery Rebate Credit for you if you qualify. 

How does a refundable credit replace a stimulus payment? 

When you have a refundable credit and the amount of the tax credit is greater than what you owe for taxes, the difference gets added to your tax refund. Learn how tax credits and deductions work

Where should I report the stimulus on my 2020 tax return? 

The amount you received from the stimulus is not taxable. You should not report your payment as income on your return.

Do I have to pay back the stimulus when I file my taxes? 

No. The check you received will not increase the amount you owe when you file your 2020 federal tax return.  

Was the stimulus an advance on my tax refund? 

No. Your refund will not be reduced because you received a stimulus relief payment. They are entirely separate. 

I earned more money in 2020. Will I have to pay back the stimulus? 

No. If your income increased in 2020 compared with 2018 or 2019, you still won’t be required to pay back the stimulus money you previously received.