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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. Timothy says:

    I owe a Hospital bill that is from a State teaching hospital and they always keep our State Refund. So will they also keep the tax rebate check. Thanks

  2. Tammy says:

    My husband owes student loans. They always keep his tax refunds. I did not file Injured Spouse for 2007 because we owed back taxes from 2006. My 2007 refund was automatically applied to my owed taxes and they are now paid in full.

    I will need to file Injured Spouse to get my portion and my child's portion of the rebate, but do I file it now or should I wait until I get a letter from the IRS stating that our rebate was applied to his outstanding loans?

  3. Tammy says:

    I should have added that we filed jointly because I knew that all of the refund would go to back taxes, but I didn't realize the rebate would go toward his loans. We just got married in 2007 so his refunds have always gone toward his loans.

  4. Raymond says:

    Tammy,

    If you want to shield your portion of the tax rebate from your husband's old unpaid student loans, you should file the injured spouse form with your tax return before the April 15 deadline. The rebate amount you get back will depend on whether you reside in a community property state or not.

  5. Rachel says:

    My husband had some old medical bills go to collections with our states Attorney Generals office. They have taken our state refund for the last two years and applied it to that debt. Will they take the tax stimulus check as well? We file Married Filing Jointly and our income is below $75,000 together.

    Thanks,
    Rachel

  6. Raymond says:

    Rachel,

    I am a bit puzzled as to why your husband's unpaid medical bills would result in a federal tax refund lien. Generally, tax refunds are not captured for private and commercial debts. Was there a seizure order against one of your bank accounts where the tax refunds were being deposited into?

    Just for your information - for tax lien purposes, the stimulus payment is treated like any other tax refund. This means that part or all of your payment can be used to pay past due federal or state income taxes or non-tax federal debt such as student loans and child support. If this occurs, you will receive a letter explaining how the stimulus payment was applied.

  7. Jordan says:

    I made a little less than $2,700 after taxes, but a little over $3,200 before taxes. Will I receive a stimulus check?

  8. Raymond says:

    Jordan,

    I presume the amount you've listed are earned income amounts from qualifying sources such as wages. If so, you made enough to cross the $3,000 initial income threshold for tax rebate qualification. If you are single, you will receive a $300 stimulus payment.

  9. kia says:

    i have 3 questions for you,
    i am a single mother of 3 and the father of my children claimed 2 of our kids, because made more money for the year of 07 than did. with me claiming only one of my children and earning less than 3,000 this year will i qualify for the rebate check?
    i was fired from my job when i became pregnant with my 3rd child and collected public assistance from mar. 07- jan 07 does my public assistance get counted as earned income even though it was not claimed on my 07 return?
    if so and i do qualify for the rebate heres the 3rd question for you,
    i have a student loan in default, but it did not effect my 07 refund nor did they start to garnish my wages at my current job, will my free rebate (if i qualify) be effected by this loan in default?

  10. kia says:

    please notify me of my comment via e-mail and on your website

  11. Raymond says:

    Kia,

    1) If your earned income was truly less than $3,000 for 2007, you will not clear the basic qualifying income eligibility to receive a stimulus payment.

    2) When you mention "public assistance", I presume you are referring to either unemployment benefits or welfare benefits based on need. Neither of them are considered earned income for tax rebate purposes and will not help you clear the initial qualifying income hurdle. However, if your public assistance was comprised of Social Security benefits it might...

    But either way, if you had taxable income, the amount would need to be reported on your federal tax return to be counted towards your $3,000 tax rebate income goal.

    3) If you haven't received an IRS Notice of Federal Tax Lien due to student loan default yet, you are probably okay for now. But eventually they will go after your future tax refunds.

  12. kia says:

    thank you

  13. deanne says:

    me and my husband filed our income taxes in feb. my question z that we made a total of 15227.00 last year what amount will me and him recieve plus we have two kids

  14. Raymond says:

    Deanne,

    Based on your income, I estimate you should receive a $1,800 stimulus payment - $1,200 for married filing jointly and 2 sets of $300 for each kid.

  15. Emmarie says:

    I'm 24 yrs old. I'm in law school. I have no children. I am not claimed as a dependent. I had student loans, but that shouldn't matter. I made $0. As I understand it, I don't get any rebate. But, do I need to file any taxes at all, or can I just not do anything, and be willy-nilly until April 15, '09? Thanks.

  16. Raymond says:

    Emmarie,

    I'm sorry you are in law school. As a recovering young attorney (late 20's), I have a somewhat jaded and pessimistic view of the legal profession. :)

    But back to the tax rebate question - if you have no income during 2007, you pay no income tax. If you make anything during 2008 however, you may qualify for the tax rebate on April 15, 2009. That's because the tax rebate may either be claimed in 2008 or 2009 - the IRS is giving us that option

  17. Mike says:

    My wife has four credit cards that were run up and left to her by her ex-husband over five years ago. HE filed for bankruptcy last year and thus she was left with the debt. All of these cards are now in collections. Will we still get our rebate check since we filed jointly?

  18. Raymond says:

    Mike,

    Although the credit cards may currently be in collection status, generally tax refunds may not be intercepted by private entities to satisfy outstanding debt (only the state and the federal government can). The tax rebate is treated the same way as a tax refund for lien purposes.

    Thus I would not worry about the credit card company intercepting your tax rebate payment. However, do note that if they haven't already done so, they may have already placed liens on your existing bank checking or savings, and may grab the tax rebate when you deposit the amount into one of those accounts.

  19. Candice says:

    i have not filed bankruptcy yet, however, i am in the process of filling out the paperwork. i am married, but i am filing, not my husband, on debt acquired before our marriage. will my bankruptcy affect our tax rebate? should i wait to file until we have received the rebate?

  20. Raymond says:

    Candice,

    Are you filing for Chapter 7 or Chapter 13 bankruptcy? The results and effects will differ.

    If you are filing a Chapter 7, you will likely lose your economic stimulus tax rebate if you file for bankruptcy protection prior to receiving it. You will likely be required to turn over all or part of the rebate check to your Chapter 7 trustee unless it can otherwise be successfully claimed as exempt under federal and state laws.

    If you wait till shortly after you receive your tax rebate to file for bankruptcy, the rebate check will likely be included as income for purposes of running the means test to see if you qualify for filing Chapter 7 to begin with.

    Chapter 13 may be slightly different. The effects would depend on how your bankruptcy trustee decides to treat the rebate. The case would obviously be moot if he or she deems the economic stimulus tax rebate as an exempt asset from trustee control.

    It's a broad question...thus it's best to ask your bankruptcy attorney on this matter.

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