The Recovery Rebate Credit

Written By H2 Strategy

The Recovery Rebate Credit

The American Rescue Plan Act (ARPA) provides for direct payments/rebates to eligible individuals in 2021. These payments, known as economic impact payments (EIP), are advance payments of the recovery rebate credit.

Eligible individuals do not include:

• Any nonresident alien

• Any individual who is a dependent of another taxpayer at the beginning of the calendar year

• An estate or trust

An EIP of $1,400 ($2,800 MFJ) was issued to each eligible individual plus $1,400 to each dependent. The payment will fully phase out when income reaches $80,000 for single filers, $120,000 for HOH with one child, and $160,000 for MFJ, QW.

The recovery rebate credit is based on the 2019 or 2020 tax return and will be reconciled when filing the 2021 tax return.

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