What is the look back credit?

[xmasbaby0]

Many people had lower incomes during the pandemic in 2020 due to reduced work hours, layoffs, etc.  Or they received unemployment benefits.   These factors affect how much earned income credit and additional child tax credit you can get on your 2020 tax return and affect your 2020 refund.

There is a “lookback” option that allows you to use your 2019 amounts for earned income credit or child tax credit.   You can choose whether to use your 2019 amount or your 2020 amount.  Choose whichever amount gives you a better tax refund for your 2020 refund.

You can see this and choose in the earned income credit section.  in Deductions and Credits.

You still MUST enter all of your 2020 income into your 2020 tax return, including any unemployment you received.

[Cynthiad66]

The “look-back” provision in the new relief bill allows them to receive EITC (and also the Child Tax Credit) based on their 2019 earned income if it would be more beneficial. By contrast, imagine a married couple with two children who had earned income of $60,000 in 2019. Their income was too high for EITC in 2019.

For instance, suppose a married couple with two children earned $25,000 in 2019 and received an EITC of $5,785. However, in March of 2020 they were laid off. They did receive unemployment, but that is not earned income. Their actual earnings from work in 2020 was only $5,000, which made them eligible for EITC of $2,010. That’s a loss of over $3,700, in a year when they were already struggling. The “look-back” provision in the new relief bill allows them to receive EITC (and also the Child Tax Credit) based on their 2019 earned income if it would be more beneficial.

By contrast, imagine a married couple with two children who had earned income of $60,000 in 2019. Their income was too high for EITC in 2019. However, due to furloughs, their earned income in 2020 was only $40,000. They will be eligible for EITC in 2020 based on their 2020 earnings (assuming they meet other eligibility rules). When calculating EITC and CTC, taxpayers can choose to use either 2019 or 2020 income figures, depending which is better for them.

 [edited 1/29/21| 9:57 pst]

[xmasbaby0]

@Cynthiad66 Where does the question above ask about rental income?  Did I miss something or was the original question changed?