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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)
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. Dave says:

    Raymond.

    Had to file for an extension this year and was wondering how filing that would affect me getting the rebate check. I have read different versions of what might happen on line and was wondering what was the truth. I tried looking through the IRS site but did not find a definite answer.

    Can you shed some light on this please. Great site, thanks a ton.

    Dave

  2. Raymond says:

    Dave,

    The IRS wants to encourage everyone to file by the normal April 15 tax deadline since the sooner you file, the sooner you can receive your stimulus payment.

    The closest IRS answer I can find in response to your question is here:

    "People who file a return after April 15 will receive their economic stimulus payment, but probably about two weeks later than the schedule shows. A return must be filed by October 15 in order to receive a stimulus payment this year. See the online calculator for an estimate of the amount you will receive."

  3. Mike says:

    Thanks so much Raymond!!! I appreciate your time! Mike

  4. Fifi says:

    So...let me try again. For several years my tax refunds have been intercepted to pay an old student loan. Pretty straightforward. For the 2007 return, however, instead of a refund I will actually owe taxes, which I cannot afford to pay (I was laid off recently). When I file, and don't include a check, I am curious to know if the stimulus payment will be applied to the 2007 taxes or to the previously mentioned old student loan. How can I find that out? I've searched but can't find any information. Any info is appreciated. Thanks.

  5. Raymond says:

    Fifi,

    Oops sorry...your previous question somehow fell through the cracks..

    Well your student loan tax lien and your 2007 unpaid tax liability will be treated separately. Your unpaid student loans will get first priority because they are currently in active collection mode. Your unpaid 2007 taxes don't enter collections until the IRS has given you several warning letters and the opportunity to pay them in full.

    Because the tax rebate is treated the same way as a tax refund, you can expect your tax rebate to be intercepted by the IRS and paid towards your old student loans. The IRS will send you a later detailing the treatment of your tax rebate.

  6. Billbob says:

    Just a few questions I retired in 2002 and receive a partial pension of about $13,000 I have not filed a tax return since receiving the partial pension. When I contacted the pension board they would not give me a 1099 and when I explained to them that I had not filed an income tax for the last 5 years they wouldn't give me a 1099r but they did send me a monthly income verification. Can I use this to file my own income tax without the 1099 or 1099r? From what I have read I do qualify for the $600 and I do have a child that I am the custodial parent that lives with me so I will qualify for the $300 also right? Thanks for any help on this matter......

  7. Raymond says:

    Billbob,

    Yes, you can use the monthly income verification to file your taxes.

    Unless your taxable pension arises from Social Security, railroad retirement, or Veteran Affair benefits...your pension will not be considered earned income for tax rebate purposes. However, if you are paying taxes on it, in some cases it doesn't matter whether the taxable income is earned or unearned. You should still file as the IRS may just go ahead and count it towards the tax rebate threshold. The treatment onus is on the IRS since they are running the calculations automatically for you.

  8. conny says:

    Just one question as long as you are on SSI and make over $3000 you are eligible right? I read the whole post and that is what I got out of it, also how do I file without a 1099...thanks so much...

  9. Raymond says:

    Conny,

    When you say SSI - are you referring to social security income or are you referring to supplemental security income? Since you seem to suggest that you did not get a Form SSA-1099 reporting your Social Security benefit information, I suspect you are actually receiving supplemental security income. Supplemental security income does not count towards the tax rebate qualifying threshold.

    But if by SSI you are referring to Social Security benefits, then yes, you seem to have enough for the rebate. To file without your 1099, you may be able to get the benefit paid information from your bank statements perhaps. You don't usually need to attach a 1099 form to your return, except when you receive a Form 1099-R that shows income tax withheld.

  10. susie says:

    i'm a single mom who recieves childsupport and a ssi check for my daughter and i was just wondering if i will get a rebate check?

  11. susie says:

    forgot to let u know i don't work.

  12. Billbob says:

    Thanks for the info Raymond, my partial pension is from a state goverment agency. When I first received my pension, I was asked if I wanted to file income tax yearly and with nothing to gain from it I told them no. The partial pension I receive I do not pay any taxes on it...so will go ahead and file anyway .....thanks...

  13. Suzy says:

    Question:
    My mother is on Social Security, she got the form from them and says she earned 8000 for the year.
    My father is on disability and he didn't qualify (he was told that by the SS office).
    My sister turned 18 this month, and is still in high school. Not working or anything.
    My other sister is 16, also in HS and not working either.

    My mom is doing her taxes, to qualify for the stimulus.
    Can she includie my dad on her taxes? Or does he have to do them and see if he qualifies by himself?
    How much will she get? I had heard that she would only get money for ONE child since the other one was already 17.
    Thanks.
    Suzy

  14. Raymond says:

    Suzy,

    I'm not sure what you mean when you say that your father didn't qualify. He didn't qualify for SS?

    Either way, your parents can submit their joint tax return as married filing jointly. They can pool their combined Social Security benefits, if any, on their joint tax return to qualify for the tax rebate. While not always taxable, Social Security income is counted as qualifying income for tax rebate purposes. I presume both of them have valid SS numbers.

    How much they'll get will depend on their total adjusted gross income and whether they paid any taxes. You're probably looking at a $600-$1,200 rebate based on their Social Security situation and joint married status, presuming no other income.

    They should be able to add on another $300 for your 16 year old sister. Your 18 year old sister is ineligible for the child rebate because she was not under the age of 17 on December 31, 2007.

    Hope this helps. Good luck!

  15. Suzy says:

    My dad called his local social security admin. office, and was told he didn't qualify for the stimulus because his income was not from SSI but from disability, and it did not qualify for the stimulus.
    In the past my parents had done their income tax as married filing separately, but since they are on disabilyt and ss they haven't had to do income taxes, so this one time my mom is doing them since she is certain she qualifies for stimulus, and is adding on my dad to her return.
    My sister was 17 on Dec. 31 2007, so I guess she is out.
    Thanks for your prompt response!

  16. susie says:

    i'm a single stay at home mom who recieves ssi disability for my daughter along with childsupport would i get a rebate check?

  17. Raymond says:

    Susie With An "I",

    Some people use SSI loosely - some use it to refer to Social Security Income while others use it to refer to Supplemental Security Income. Supplemental Security Income is specifically excluded from tax rebate qualification, but Social Security Income may be included. You will need at least $3,000 of qualifying income to pass the initial threshold test for the tax rebate.

    Child support does not count as earned income and cannot count towards the $3,000 tax rebate qualification. Since you are currently not working, unless your "SSI" refers to Social Security Income and exceeds $3,000, you will not qualify for a rebate.

    I hope that was clear!

  18. Vivian Martinez says:

    My daughter has me as dependent and I receive SS benefits. Do I need to fill the requiered form or does she gets the stimulus check from myself with hers.???

  19. Raymond says:

    Vivian,

    Because your daughter claimed you as a dependent for tax purposes, you will not be entitled to a tax rebate payment for yourself. Your daughter will not get any extra tax rebate on your account either.

  20. Matt says:

    If we owe taxes will we still get a stimulus check or do we have to deduct it from what we owe for the year.

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