Turbotax figured I am qualified for $2800 for first stimulus payment, and $1700 for second stimulus payment, but my Recovery Rebate Credit shows only $1200, why?

[NCperson]

not following your question

You are to enter the ACTUAL amount you received for each stimulus when asked.  if you are due more stimulus, it will show on Line 30 of Form 1040. 

sounds like there are 3 people in your family (you, spouse and a child under 17) and your income was high enough that the stimulus and the recovery rebate were each reduced.  there is a work sheet in TT that should take you through all the gory math.

was your 2020 income lower than your 2019 income? did you have a child in 2020? 

you haven't provided enough details to figure out the 'why', but that worksheet will explain it (or post your family details and I can figure it out)

[lefw]

@NCperson Thanks for the answer. It is for 3 of us and no new child in 2020. I didn't receive any payments so I entered 0 for both. My 2019 AGI is 160k and my 2020 AGI is 180k.  

[NCperson · Accepted solution]

so here is how it is calculated... It is all based on 2020; 2019 does not matter

1st stimulus: $1200 + 1200+ $500 = $2900; but it is reduced since you income is over $150,000, it's reduced by 5% for the part over $150,000 or $30,000*5% or $1500.  so that leaves $1400,

2nd stimulus: $600*3 = $1800 and then again reduced by the same $1400, leaving $400,.

Line 30 should be about $1800,

ps I suspect your income is closer to $186,000 - that math will get you to $1200 on line 30.

you also won't get the third stimulus because anyone whose income exceeds $160,000 gets zero.  if your income drops below $160,000 for 2021, you could get some via Line 30 in your 2021 tax return

[lefw]

@NCperson  That helps a lot, thanks! I agree with your calculation totally.

But one question, why do we use 2020 income to calculate the stimulus payment? Everyone who received stimulus checks in the middle of 2020 has only 2019 income that IRS can use for calculation.

For me that is a big difference due to income bump in 2020.

[JotikaT2]

The stimulus payment amounts issued in 2019 or in January 2020 were based upon your 2018 or 2019 income tax returns filed.

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

[NCperson · Accepted solution]

here is how the law worked for the 1st two stimulus payments:

those payments were what was called 'an advance' against 2020 payments.  

So since the IRS didn't know your 2020 status (dependents, income) DURING 2020, the law required the IRS to ESTIMATE what you were due based on your 2019 tax return information and if that wasn't available they were to use 2018 data,. 

But the ACTUAL amount you were due was based on the information in your 2020 tax return - income, dependents, etc.

if the ACTUAL was higher than the ESTIMATE (example children born in 2020 who were not listed on the 2019 / 2018 tax return), you get the difference on Line 30 of Form 1040

if the ESTIMATE was higher than the ACTUAL, you are not required to return the money to the IRS, so Line 30 will be zero.  In other words, Line 30 can never be negative. 

For the 3rd stimulus payment it will work the same way, but with a one year delay.  The stimulus is based on your 2020 tax return (and if not received, your 2019 tax return).  That is the ESTIMATE.

Next year when you submit your 2021 tax return that will be the ACTUAL. 

if the ESTIMATE was higher than the ACTUAL, you are not required to return the money to the IRS, so Line 30 will be zero.  In other words, Line 30 can never be negative. 

yes, some people 'won' under this formula. For example, I didn't make much money in 2019 so I got the  two stimulus payments but when I completed by 2020 tax return, I actually made a LOT of money so was not eligible for the money (ESTIMATE more than ACTUAL) I am not required to return the money because the law was written that way.  

make sense? 

[lefw]

@NCperson Yes, All these totally make sense! 😀  Thank you so much!