If you’re worried about owing taxes because of your stimulus money, here’s what you need to know.
- There’s a limited number of situations where you need to pay back stimulus money.
- The IRS has contacted tax filers who miscalculated when claiming the Recovery Rebate Credit.
- Overpayments on the Child Tax Credit could also result in an expensive tax bill.
Since the IRS first sent out stimulus checks, many have wondered how it will affect their taxes. Stimulus money is technically a tax credit, which means it doesn’t count as income and normally won’t raise your tax bill.
If you received an overpayment, that’s a different story, and you may need to repay that on your taxes. However, the rules vary on this. To help you know what to expect, we’re going to cover when you will and won’t have a bigger tax bill because of stimulus money.
You won’t need to repay stimulus money if your income increased
Probably the most common worry is that you’re going to need to pay back stimulus money because your income was too high. The stimulus checks all had income limits attached, and the IRS calculated how much to send based on your most recent tax returns at the time.
For example, single filers who made at least $80,000 weren’t eligible to receive the stimulus check that was sent out in 2021. But what if you made $75,000 in 2020, and then $100,000 in 2021? You would have received that stimulus check based on your 2020 income, even though you wouldn’t qualify based on your 2021 income.
For overpayments like these, you’re not required to pay anything back. It’s the rare case where the IRS will let you keep the extra money.
Here’s when you’ll have a tax bill on stimulus money
There are some situations where a stimulus overpayment may result in a larger tax bill. They don’t apply to most people, but it’s good to know about them, just in case any of them apply to you.
You miscalculated when claiming a Recovery Rebate Credit
The Recovery Rebate Credit is a tax credit available to those who didn’t get as much stimulus money as they should’ve. If you’re still owed stimulus money, you can claim a Recovery Rebate Credit.
If you made a …….