Recovery Rebate Credit

Tax credit for 2008 only for people who did not receive the economic stimulus

The recovery rebate credit is a special federal tax credit for 2008 only. The credit is available for individuals who did not apply for the economic stimulate rebate in 2007. The recovery rebate credit is also available for people who's rebate is higher when calculated using their 2008 financial information.

In 2007, Congress authorized the IRS to issue advance tax refunds called the economic stimulus rebate. These advance rebates were calculated using information from a person's 2007 tax return.

Some people did not receive their stimulus rebate. Perhaps because they did not file a return. Or perhaps because they filed their return after the October 15th deadline. Or perhaps because they did not qualify for the stimulus rebate because their income was too low or too high.

Such individuals are eligible to claim a recovery rebate credit. The credit is calculated using the same criteria as the stimulus rebate. The difference is the recovery rebate uses 2008 income information. That means a change in your income or dependents might make you eligible for a higher rebate amount.

Technically, the recovery rebate is the difference between the tax credit amount as calculated using your 2008 information, minus any stimulus payment you received. If your 2008 credit is higher, you get the difference. If the credit as calculated using your 2008 figures is lower, you don't have to repay the difference. The recovery rebate shows up as a refundable tax credit on line 70 of Form 1040.


What's the Maximum Recovery Rebate Credit?

$600 for unmarried persons and $1,200 for married couples. Plus an additional $300 per qualifying child. The credit is reduced by any economic stimulus rebate you received.


How Will the Recovery Rebate be Calculated?

The rebate is limited to the net tax liability. For many people, this amount will be the same as found on Form 1040 Line 56, Form 1040A Line 37, or Form 1040EZ Line 11. The rebate is reduced if the net tax liability is less than the maximum credit. The rebate will also be reduced for people with higher incomes. The stimulus rebate is reduced by 5 percent of the amount of income in excess of $75,000 (or $150,000 for married couples).

The IRS has provided a worksheet for calculating the recovery rebate credit on pages 61 and 62 of the Instructions for Form 1040 (pdf).

You can also ask the IRS to calculate your rebate recovery credit for you. On the dotted lines next to Form 1040 line 70 write in "RRC."


Who's Eligible for the Rebate?

Individuals who have at least $3,000 in qualifying income, and who did not receive their stimulus rebate in 2008 or whose rebate is higher when calculated using their 2008 financial information.


Who's Not Eligible for the Rebate?

Dependents, or people who could be claimed as dependents by another taxpayer, are not eligible. Also ineligible are non-resident aliens, anyone without a valid Social Security Number, and estates and trusts.


What's Qualifying Income?

Wages, self-employment, Social Security benefits, Railroad Retirement benefits, and veterans' disability compensation, pension or survivors' benefits received from the Department of Veterans Affairs in 2008. Supplemental Security Income (SSI) does not qualify for the recovery rebate.


Qualifying Children and Dependents

Any child under age 17 who is related to the taxpayer by blood, marriage, adoption or foster arrangement and whom the taxpayer can claim as a dependent for 2008. Dependents age 17 and over do not qualify for the additional rebate. Dependents of any age do not qualify for the rebate in their own name even if they earn their own income.


How will the Recovery Rebates be Processed

The IRS will issue the recovery rebate as part of the taxpayer's refund. Unlike in 2008, the IRS will not send out two separate refunds. Rebates will be sent by direct deposit, if bank account information was provided on the 2008 tax return, or by paper check.


Filing a Return

Individuals must file a 2008 tax return to receive the recovery credit. Even if the person does not have a filing requirement and does not have a tax liability, they will still need to file a return so that the IRS will know that the person qualifies for the recovery credit.

If you are filing a 2008 tax return solely for the purpose of claiming the stimulus rebate repayment, show your nontaxable Social Security benefits, veteran's disability pension, or Railroad Retirement benefits on Form 1040 Line 20a or on Form 1040A Line 14a. This will let the IRS know that you have qualifying income for the purposes of the recovery rebate, even if you have no taxable income.


Direct Deposit Issues

The IRS prefers to send out refunds via direct deposit. This means you need to make sure your direct deposit information is absolutely, positively, 100% accurate. Any mistake here could result in losing your rebate forever.


IRS Tools to Help You Out

The IRS has two applications on their Web site to assist you with the Recovery Rebate Credit. You can find out how much the IRS sent you last year for the stimulus rebate by using How Much Was My 2008 Stimulus Payment? And once you know that information, you'll be able to use the Recovery Rebate Credit Calculator to figure out if you eligible for any additional rebates on your 2008 tax return.