Refund

[P_T]

My initial calculated refund was $5,860, but when I inputted my Stimulus checks for my wife and I (3,600) my refund dropped to $3,427.  I thought the Stimulus checks were not taxable.  Please give my an explanation.

Thanks

[JotikaT2]

The stimulus payments are not taxable.  However, if you had not put in your stimulus payments before, your return was calculating the Recovery Rebate Credit and that was generating a higher refund.  

The amount of the Rebate Recovery Credit is based upon your actual 2020 income tax return you file.  Therefore, if you meet the criteria for the credit, you will receive it when you prepare your 2020 income tax return.  The credit is intended to give those who should have received a stimulus payment but never did a tax credit on their tax returns.  Any excess credit is then refunded to you if there is an overpayment on your tax return.

Please see the attached link for more information on who can claim the credit.

Recovery Rebate Credit eligibility

When you entered your stimulus payment actually received, it removed the Recovery Rebate Credit as you would not be entitled to it.  Therefore, your return is back to its actual refund amount.  

[VolvoGirl]

You are not paying tax on them and it is not deducting it from your refund or increasing the tax due.  Turbo Tax started out by assuming you didn't get it and  giving you credit for the whole amount so your refund was too high to begin with.  Then when you entered what you already got the starting refund was reduced or the tax due increased to your real actual refund.  Otherwise you would be getting the Stimulus amount again on your tax return.

Look at your return.  The Stimulus payments do not show up anywhere as taxable income so you are not being taxed on it.  And it's not being subtracted anywhere.