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Breaking Down The Details Of The 2008 Economic Stimulus Plan and Your Tax Rebate Check

Published 2/12/08 (Modified 3/14/11)
By MoneyBlueBook

Update: Read About The Possibility Of A 2009 Second Stimulus Check

With both the U.S. House of Representatives and the Senate having nodded their respective approvals of the nearly $160 billion economic stimulus package (that's "B' as in Billion), the bill has finally been signed, sealed, and delivered to President Bush for final approval. The President has already indicated that he will quickly sign the economic aid into law - so I believe the rebate checks will soon be on their way to a mailbox or direct deposit account near you.

I shall try to explain how the 2008 economic stimulus package will work and how much you can expect to receive in the way of a rebate check.

1) Why Are We Getting A Tax Rebate Check?

The Tax Rebate Check is part of the U.S. government's emergency pro-growth economic stimulus plan to prevent the U.S. economy from stalling out and entering a period of prolonged recession. Due to the recent slowdown in the economy caused by housing bubble problems and subprime mortgage related issues, the federal government wants to keep the economy on the up and up by putting money into the hands of U.S. consumers to encourage increased consumer spending. Like jump starting a car, the government wants to hand consumers extra wads of cash to encourage increased business investment and consumer activity. Surveys have indicated that at least half of consumers intend to use the money to pay down existing debt, while the other half intends to either save or spent it on extra things. Personally, I plan to save my economic stimulus check if I qualify for one. While the stimulus plan also provides some business incentives, I will only focus on the consumer side tax rebate checks at this time.

2) How Does Qualifying For And Receiving A 2008 Tax Rebate Check Affect And Relate To My 2007 and 2008 Tax Returns?

The economic stimulus tax rebate is counted as a tax credit against your future 2008 tax bill. However, you are entitled to the full qualified rebate amount when you file your 2007 tax return by the April 15, 2008 deadline. Qualification to receiving it now will be based on your 2007 income information. Taxpayers should not be concerned that the tax rebate is only a mere future credit that has been accelerated into the present in terms of timetable. The economic stimulus tax rebate is a true credit for qualified taxpayers (free money essentially). The rebate amount that you receive now will not be used to offset any of your future income tax bill or any anticipated refund checks from filing your future 2008 tax return on April 15, 2009.

The economic stimulus plan is flexible and permits taxpayers to either file their tax return on April 15, 2008 and get their rebate checks now (the preferred route), or wait till April 15, 2009 to file their 2008 tax return and get their rebate checks then. Note that even if you file now and qualify for a rebate check, and your status changes and you become eligible for a larger rebate when you file your 2008 tax return next year, you can still claim the positive difference at that time. In addition, you will not have to give back any rebate money already received even if your status change causes you to later qualify for a lesser amount for tax year 2008 when you file in 2009.

3) Who Will Get A Tax Rebate Check and How Much Will I Receive?

The economic stimulus tax rebate checks are intended to go into the hands of low to middle income Americans (those who are supposedly more inclined to spend them immediately). Thus while most ordinary taxpayers will qualify for a stimulus check, those who make a lot of money are likely to be partially or fully phased out of receiving a rebate.

The amount of your tax rebate will be based on your 2007 federal income tax return's adjusted gross income (AGI), which is not just your annual salary. Your AGI includes all income sources including wages, salaries, tips, interest, alimony paid to you, and dividends, offset by any specific business, or capital gains or losses - but it does not include the personal exemption, or any standard or itemized deductions. You are entitled to receive the full rebate amount unless your adjusted gross income exceeds a certain threshold, in which case you will either receive a reduced rebate or be entirely excluded from receiving one at all if your income is simply too high. However, the economic stimulus package is intended to cover many people and nearly 130 million Americans are expected to qualify for at least part or all of their entitled tax rebate check.

The proposed plan that is expected to be approved will provide one time check rebates of up to $600 for individuals or $1,200 for couples, along with an additional $300 for each child (classified as dependents under the age of 17). Low income people, including retirees on Social Security or Veterans disability benefits who earned at least $3,000 will receive checks of $300. Low to middle income people including retirees who made enough to pay taxes will receive higher tax rebates up to their net tax liability, limited only by their AGI. But so long as you paid taxes and made ($3,000 or more a year but less than $75,000 as a single individual), or ($3,000 or more, but less than $150,000 a year as a married couple), you will be entitled to the full tax rebate check.

If you exceed the adjusted income threshold, you may still get a rebate, but it will be reduced by 5 percent of the amount you earned above the adjusted gross income limits of $75,000 for single filers and $150,000 for couples. Thus for example: A single filer with no children and an adjusted gross income of $80,000 ($5,000 over the limit), will see his or her rebate check reduced by $250 (5% of $5,000), and will receive a check for $350, instead of the full $600. Rebate checks will phase out completely for single filers who earn over $87,000 and for couples who earn over $174,000.

Single Individuals (AGI)
Qualify For A Rebate Check?
Less Than $3,000 (must be earned income)
($3,000 - $75,000), but DID NOT pay taxes Yes - $300, plus extra for each child
($3,000 - $75,000), but DID pay taxes Yes - $600, plus extra for each child
(Over $75,000 - $87,000) Yes - But for income that exceeds $75,000, your rebate will be reduced by 5% (in $1,000 increments), plus extra for each child
Over $87,000 income Maybe - You have been phased out, but can still get rebates for your child
For Each Child You Have Additional - $300 per child
Married Couples (AGI)
Qualify For A Rebate Check?
Less Than $3,000 (must be earned income)
(3,000 - $150,000), but DID NOT pay taxes Yes - $600, plus extra for each child
($3,000 - $150,000), but DID pay taxes Yes - $1,200, plus extra for each child
(Over $150,000 - $174,000) Yes - But for income that exceeds $150,000, the rebate is reduced by 5% (in $1,000 increments), plus extra for each child
Over $174,000 income Maybe - As a couple, you've both been phased out, but can still get rebates for your child
For Each Child You Have Additional - $300 per child

4) Who Is Excluded From Receiving An Economic Stimulus Rebate Check?

If you are a single individual who earned more than $87,000, or if you are a married couple that earned over $174,000 for the year, you are likely excluded from receiving a rebate check, unless you can otherwise claim any extra child rebates. Keep in mind that the child rebates can also be phased depending on how much your adjusted gross income exceeds the income threshold.

If you're a young college student who had earned income for 2007 but are claimed as a dependent under your parent's tax return, you are ineligible for the tax rebate as well.

Under the Senate approved proposal, illegal immigrants will also not be eligible to receive tax rebate checks for obvious reasons.

5) What Do I Have To Do To Get My Tax Rebate Check?

To get your tax rebate check now, you must file your 2007 federal tax return (either a form 1040 or 1040 EZ) by the April 15, 2008 filing deadline. Or you can wait until April 15, 2009 to file your 2008 tax return and obtain it then (although, why would you want to wait until then?). I recommend using a low cost online tax preparation program such as Turbo Tax or Tax Cut to assist you (both are reasonably priced and provide accurate results). Even if you don't usually file a tax return because you don't earn enough to owe taxes like some retirees or veterans on disability, you will still need to file a 2007 tax return in order to receive the economic stimulus check.

6) When Can I Expect To Receive My Tax Rebate Check?

The Internal Revenue Service (IRS) intends to start issuing the rebate checks starting May 2008 to qualified recipients who properly and timely submit their tax returns by the April 15, 2008 filing deadline. If you miss the annual tax filing deadline or request a filing extension, it is possible you won't receive your rebate check until the end of the year (thus I suggest you file by April 15, 2008 - mark it on your calendar and circle it!)

7) Where Can I Get More Information About The Tax Rebate?

To get official answers to your tax rebate concerns and queries, you should check the official IRS website link on the subject. Please take a look at my post on obtaining official Answers To 2008 Economic Stimulus Questions. For an unofficial response however, you can try posting your comments or questions here.

Updated Note: The IRS has released the official Economic Stimulus Payment Schedule.

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405 Responses to “Breaking Down The Details Of The 2008 Economic Stimulus Plan and Your Tax Rebate Check” 

  1. Aileen says:

    My husband and i filed Chapter 7 in April 2007. The trustee has already taken their cut of my refund. Will i have to turn this over to the trustee as well?

  2. Raymond says:


    It's hard for me to say for certain whether your trustee will take your tax rebate payment or not. However, since the tax rebate is treated the same as a tax refund, it is reasonable to expect similar treatment as well by the trustee. There is simply somewhat of a subjective element to this.

  3. Stephanie says:

    If I am single, no kids and AGI is about 33000 and filed taxes will it be 600 or only 300? I keep hearing different things.

  4. Raymond says:


    Based on your AGI, your tax rebate should be $600, assuming you had net tax liability of $600 or more.

  5. Christi says:

    I am a 28 yr old, full time student with three children, I made less than 3000 because I work only part time as a work study student. I made around 2600 - will they take into consideration the fact I am a full time student? Or will I not get a refund?

  6. Raymond says:


    Unfortunately, your student status has nothing to do with your qualification to receive a tax rebate payment. Because you made less than $3,000 in qualifying income in 2007, you will not be entitled to a tax rebate for yourself or your children. However, if you can make enough in 2008, you may be able to claim a rebate payment on April 15, 2009.

  7. Lynn says:

    I was receiving Social Security disability. I am now working and repaying a SS overpayment. I am on a payment plan with SS and have not missed any payments. I owed taxes this year which I paid. My question is: Will my rebate be withheld because I am repaying a SS overpayment? I never received a letter from the IRS saying I am getting the stimulus rebate.

  8. Raymond says:


    Most installment payment plans of that type generally have a provision and condition that requires any tax refund due in a future year to be applied against the amount owed. Since the tax rebate is treated the same as a tax refund, I would expect the rebate to be applied towards your unpaid Social Security liability.

    By the way, the IRS stimulus rebate notification letter is immaterial. Receiving or not receiving it in no way affects your entitlement to qualify for the tax rebate. If there's an ultimate offset of your tax rebate, the IRS will mail you an explanation letter at the time you are scheduled to receive it.

  9. Angie says:


    My husband and i filed for chapter 7 bankruptcy on march 12. we have all ready went the the meeting of the creditors .we filed under CA Law and they did not say anything about keeping the stimulus plan check do you think they will keep it anyways? how do we find out so we can actually be able to start our life after bankruptcy please help with what you can Thank you Angie

  10. Raymond says:


    Was there mention by the trustee of what they intended to do with your anticipated 2007 tax refund if any? Since the tax rebate is treated as a tax refund, if the trustee and creditors have no desire to claim your refund, it is likely your tax rebate may be spared as well. The tax rebate is a bit different from your usual tax refund since it's not really an overpayment of tax money. Since the rebate is more akin to that of governmental assistance for "lower income" people, it is possible the trustee viewed it as income better served to remain in your hands.

  11. rj says:

    Quick question for you. Wife filed MFS and already has her refund and I have yet to turn in my tax return for 2007. She received the generic you might be eligible letter from the IRS already. Is she still eligible for the stimulus refund?

  12. Raymond says:


    You haven't filed your taxes yet? It's already past April 15...better hurry up! Interest and penalties are accruing courtesy of the IRS.

    As for the tax rebate question, so long as your wife qualified for the tax rebate under the qualification rules, she'll receive it in due time. Stimulus payment starts in mid May. The generic "you might be eligible" letter doesn't actually mean anything.

  13. Angela says:

    My husband and I received a notice from the IRS last week stating that they believe we made an error on our 2006 returns, and if so we owe $3000. We have the option of notifying them in writing that we are disputing this, which we are doing. We would qualify for a $1500 stimulus payment - will we still receive it?

  14. Raymond says:


    The IRS generally does not start intercepting tax refunds to satisfy unpaid tax debt until it has given taxpayers proper notice and the opportunity to respond. Since you are still in the early, active dispute stage, I anticipate you will still receive your tax rebate as scheduled.

    Good luck on the dispute. Hope it works out.

  15. Talisha says:

    I recently file Chapter 13 (March) and owe the IRS a significant amount of money which is included in my payments. I also owe an additonal $300 for 2007 which is also included in payments for 13. What are my chances of receive a stimulus refund?

  16. Raymond says:


    Since you have filed for chapter 13 bankruptcy and are currently in the midst of it, it is very likely your tax rebate will be intercepted by the trustee. However, what he or she does with it is subject to some subjective debate. I can see why the trustee would treat it like a tax refund and withhold it from you, but then I can also see why the trustee may want to return the amount to you, viewing it as more of a governmental assistance payment meant to help lower income people.

    But if I had to pick one, I would think it's more likely that your tax rebate will be intercepted by the trustee to pay off your debts.

  17. Carol says:

    We file jointly and did for '07. Already received our refund. If getting a refund, does that mean we are disqualified for the rebate? thanks

  18. Raymond says:


    Tax refunds and tax rebates will likely arrive at separate times. If you guys filed your 2007 tax return early, you probably received your tax refund earlier as well. The tax rebates should be arriving during mid-May if you chose direct deposit.

  19. Kris says:

    My husband & I owe this year, I filed for a payment extension. The extension deadline is 7/31/08. Will we get our rebate or will it go towards our taxes?

  20. Raymond says:


    If you filed for a hardship extension of time for payment of tax, the stimulus rebate will get applied to your unpaid tax liability and you will not receive a check unless there was excess amount leftover.

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