What You Need to Know about the Recovery Rebate Credit (RRC)

The American Rescue Plan Act (ARPA) of 2021 authorized a third Economic Impact Payment. The Economic Impact Payments received in Tax Year 2021 were advance payments of the 2021 Recovery Rebate Credit. Most eligible people have already received the payments and will not have to include this information on their 2021 tax return.

Here's what you need to know about Tax Year 2021 RRC:

  • The RRC is a fully refundable credit. 
  • The RRC was paid in advance to most taxpayers as an Economic Impact Payment (EIP), beginning in April 2021.
  • You may be able to claim RRC on your Tax Year 2021 Form 1040 for each eligible taxpayer and qualifying dependent if you did not receive the EIP.
  • The maximum amount of RRC per eligible taxpayer is $1,400.
  • The maximum amount of RRC per qualifying dependent is $1,400. 
  • A qualifying dependent is a qualifying child or qualifying relative.
  • RRC begins to decrease in value if your adjusted gross income (AGI) exceeds:
    • $150,000 if married and filing a joint return or if filing as a qualifying widow or widower
    • $112,500 if filing as head of household or
    • $75,000 for eligible individuals using any other filing status
  • The RRC is completely phased out to $0 if your AGI is at least:
    • $160,000 if married and filing a joint return or if filing as a qualifying widow or widower
    • $120,000 if filing as head of household
    • $80,000 for eligible individuals using any other filing status

Who is an eligible taxpayer for RRC?

       An eligible taxpayer must:

  • Have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions).  (Exceptions apply for members of the military and their spouse).
  • Be a U.S. citizen or U.S. resident alien. For more information see Publication 519, U.S. Tax Guide for Aliens.
  • Not be a dependent of another taxpayer's tax return for tax year 2021.

Who is a qualifying child for RRC?

      A qualifying child must:

  • Be claimed as a dependent on your tax return.
  • Be under age 19 at the end of the tax year; or under age 24 at the end of the tax year and a student, and younger than you; or any age and  permanently and totally disabled.
  • Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, grandchild, niece, or nephew).
  • Not provide more than half of his or her own support for the tax year.
  • Have lived with you for more than half the tax year.
  • Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes).
  • Be a U.S. citizen, U.S. National, U.S. resident alien, or a resident of Canada or Mexico. For more information see Publication 519, U.S. Tax Guide for Aliens.
  • Have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions).  An exception applies for Adoption Taxpayer Identification Numbers (ATIN).

Who is a qualifying relative for RRC?

       A qualifying relative must:

  • Be claimed as a dependent on your return and who is not your qualifying child.
  • Not be the qualifying child of any other taxpayer.
  • Be related to you in one of several ways or lived with you all year as a member of your household (and your relationship must not violate local law).
  • Be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. For more information see  Publication 519, U.S. Tax Guide for Aliens.
  • Have a Social Security Number issued by the Social Security Administration before the due date of your tax return (including extensions). An exception applies for Adoption Taxpayer Identification Numbers (ATIN).
  • Have gross income less than $4,300 in 2021. (Exceptions exist if the person is disabled.)
  • Have been provided by you more than half their total support for the year. (Exceptions exist for multiple support agreements, children of divorced or separated parents, and parents who live apart.)
  • Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes)

 

See FAQs about the Third Economic Impact Payment for additional information.

Find information and FAQs for Tax Year 2020 RRC at 2020 Recovery Rebate Credit.

Protect your clients by knowing the questions to ask to help your clients get the most out of refundable credits.

 

What other resources do we have for you? Check out the EITC Central and Other Refundable Credits welcome page.