Can a dependent based on 2020 taxes claim the 2021 Recovery Rebate Credit?

Question

So I graduated college in 2021 and based on discussions with my parents they are not going to claim me as a dependent for the 2021 tax return, but they did for 2020 and 2019, I'm not sure which year was actually pulled for their 3rd impact payment. Based on this, I believe I may be eligible for the 2021 Recovery Rebate Credit, despite my parents already receiving money for me with the 3rd payment. This IRS page says the following about previous dependents:

Q C9. Dependents: I didn’t receive the Economic Impact Payment because I was claimed as a dependent on someone else’s 2020 return. Can I claim the Recovery Rebate Credit if I’m not a dependent in 2021? (added January 13, 2022)

A9. Maybe. If you were claimed as a dependent on someone else’s tax return for 2020, you were not eligible for the third Economic Impact Payment. If no one can claim you as a dependent for 2021 and you are otherwise eligible, you can claim the 2021 Recovery Rebate Credit on your 2021 tax return.

Married persons who didn’t receive the third Economic Impact Payment should determine their eligibility for the Recovery Rebate Credit when filing their 2021 tax return. You and your spouse can’t be claimed as a dependent on someone else’s return for the 2021 tax year if you claim the 2021 Recovery Rebate Credit on a joint tax return that you and your spouse file together. See Joint Return Test PDF under Dependents in Publication 501, Dependents, Standard Deduction, and Filing Information.

If you file electronically, the tax preparation software will help you figure your 2021 Recovery Rebate Credit. Visit IRS.gov/filing for details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in your community or finding a trusted tax professional. The Recovery Rebate Credit Worksheet in the 2021 Form 1040 and Form 1040-SR instructions can also help calculate the credit.

My main questions are:

1. Can I legally claim this credit?
2. If I do claim the credit, will they attempt to recover the money from my parents?

For more context I am single filing for 2021 and taking the standard deduction

Answer 1

First of all, what matters is whether your parents can claim you as their dependent on their taxes (i.e. meet the conditions to be able to claim you), not whether they actually do. If they meet the conditions to claim you but choose not to, you are still not eligible for the stimulus payments. I will assume that they can't claim you as their dependent (i.e. they do not meet the conditions to be able to claim you) for the 2021 tax year.

The answers are: 1. Yes, 2. No.

In your parents' case, they got their Economic Impact Payment #3 based on their 2019 or 2020 tax year, in which they claimed you as a dependent. Therefore, they got an additional $1400 for claiming a dependent, assuming their income is low enough. Their Recovery Rebate Credit #3 is based on their 2021 tax year, in which they did not claim you as a dependent. Therefore, their RRC #3 would presumably be $1400 less than they received in EIP #3. Their RRC #3 is reduced by the amount they received in EIP #3, which would normally be -$1400, but the law says it cannot be reduced below 0. So they just get 0 credit and don't have to pay anything back.

In your case, you got no EIP #3 based on your 2019 or 2020 tax year, since you could be claimed by someone as a dependent. Your RRC #3 is based on your 2021 tax year, in which you could not be claimed by anyone as a dependent. Therefore, you qualify for $1400 RRC #3 (assuming your income is low enough), which is more than you received in EIP #3 ($0), so you get a $1400 credit on your 2021 tax return.

Both of these are correct. It's just that each of you got a more advantageous result by using a different tax year (your parents with 2019/2020 and you with 2021). But assuming that you guys correctly filed the tax returns for the years that were used in the determination, you guys each received the correct amount you were entitled to under the law. There is no provision in the law that bars multiple people from receiving an amount for claiming the same dependent (or someone receiving an amount for claiming a dependent, who also received an amount themselves) based on different tax years, if they were all truthfully claiming that person in the tax year that is used.