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)
No
($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)
No
(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. Raymond says:

    Matt,

    You should still receive your tax rebate payment as usual. If you have unpaid taxes for 2007, the IRS will send you a separate demand letter for payment. Try to pay off your balance if you can - interest and penalties add up quickly.

  2. Lana says:

    Hi,
    Thank you im advance for answering these questions. I just want to be clear. I am a stay at home mom , I am the payee for my son's Supplemental Security Income. My husband and I file MFJ and for the past three years, our taxes have been offset. I don't have an income. So, is there any point in filling out the Injured spouse form. My son is under 17, so I know we qualify to receive the 300...will they take that as well.

  3. Lana says:

    Oh and we would have qualified for the 1200 due to our AGI

  4. Raymond says:

    Lana,

    I am unclear as to the specifics or details of your tax offset. The only reason you would need to file for injured spouse would be if your joint tax refund was being used to offset the unpaid liability of one spouse to the detriment of the other. Also, since you had no income of your own, an injured spouse claim wouldn't help you since none of the tax refund was related to your specific income producing efforts.

  5. Matt says:

    If we file an extension will we receive the stimulus check or do we need to file the full return before a stimulus check is sent?

  6. Raymond says:

    Matt,

    If you file for an automatic extension, you will not receive your tax rebate payment until you have filed your full tax return.

  7. tiff says:

    i made under 3000 dollers but i have a 8 month old son which i claimed, will i get anything for my son?

  8. Raymond says:

    Tiff,

    Because you did not make enough to pass the $3,000 tax rebate qualification amount, you will not be entitled to a rebate payment for either yourself or your son.

  9. Jean says:

    My husband and i filed jointly in CA. He has an overpayment liabilty from unemployment benefits. Our Ca state income tax refund was already intercepted. Will our stimulus check be intercepted as well, even though it isnt a federal debt? Also what if any other state or local debt can be intercepted, what about any court debt?

  10. Raymond says:

    Jean,

    As noted by the IRS, under the Financial Management Services (FMS), a bureau of the U.S. Department of the Treasury, federal tax refunds may be applied as a refund offset to any outstanding Federal tax, non-tax child support, Federal agency non-tax debt, or State income tax obligation prior to crediting the overpayment to a future tax or making a refund.

    This program allows for state government agencies to intercept federal income tax refunds and apply them to delinquent state tax.

    Since the tax rebate is being treated as a tax refund, I would expect the rebate payment to be intercepted by the state of California in your case.

    Whether ordinary court debts may cause your tax refunds to be intercepted will depend on whether they are child support, student loan, or tax related. Private debts generally cannot intercept tax refunds.

  11. Niki says:

    We filed Chp 13 BK in 2006 - we did get a fed tax refund and it didn't go to the trustee. We have back taxes that are being paid on thru the BK currently.
    Will we receive our "stimulus rebate" or can the trustee actually "intercept" it?

  12. Raymond says:

    Niki,

    Did you receive your 2006 tax refund before or after you filed for Chapter 13? Since the tax rebate is being treated the same way as a federal tax refund, I would be interested to know how your trustee treated the refund after you filed for bankruptcy.

  13. Nancy says:

    I filed my taxes today with a request for a payment plan due to owing for 2007. Will I still get the rebate check or will they keep it.

  14. Raymond says:

    Nancy,

    I presume you have already received your General 30 Day Letter and Notice of Deficiency. Since the tax rebate is being treated like a tax refund, I would expect the IRS to hold your tax rebate payment to be used to pay towards your unpaid tax liability of previous years.

    With that said, due to the rapid fire speed at which these rebate payment checks are being hastily sent out, there is somewhat of a likelihood you may still end up receiving your rebate. That might be an oversight on their part however.

  15. Chris says:

    How about if you have a child who was 16 for half the tax year - will they be eligible for the stimulouse credit?

  16. Raymond says:

    Chris,

    According to the IRS, to qualify for the $300 child rebate, the child must be under the age of 17 on December 31, 2007. Half of the year doesn't appear to be good enough for stimulus payment purposes.

  17. Tammy says:

    I am a single parent of a disabled son age 26 claimed him as a dependent on my 2007 taxes will I be eligible for the 300.00 for him?

  18. Raymond says:

    Tammy,

    Wow....your name seems to be quite popular and common...lots of Tammy's have been asking tax rebate questions.

    As for the child rebate...unfortunately, the child must be under the age of 17 to qualify.

  19. MARY says:

    between my husband and i we earned 35000 in 2007 will we get a rebate.

  20. Raymond says:

    Mary,

    This one's easy - Assuming the $35,000 includes at least $3,000 of qualified income (including earned and Social Security) - Yes!

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