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. Anetha Costello says:

    I went through a divorce last year after 15 years of marriage. When I filed taxes in February, my refunds were taken by the IRS to offset debt from previous years that I knew nothing about. To make a long story short, I have filed for Innocent Spouse which is in review now. I'm confused about what happens now in regard to "collections" while the case is in review (which accoding to sites I have read can take up to 1 year). The IRS site states that once you have filed for the Innocent Spouse, all collections are stopped until a determination is made. Does this mean that they will not take the Stimulus check due myself and my children?

  2. eric says:

    An injured spouse form adds 4-8 weeks to your return. the earlier you file it the faster you get your return.

    I'm no pro, but you need to find out what the debt is, and who caused it. you will have to prove it was not your fault for the debt to get any refund. You will need to hire a CPA if you possible can.

  3. eric says:

    sorry this is not laid out proper, it is bits from several letters I have written in the last few days.

    Here is where we stand today, I guess we are somewhat lucky. My parents are letting us use their CPA to handle the matter since we can get nowhere tring to deal withthe issue ourselves.

    We had a tax issue back in 2002, the ohio dept of taxation and the ohio attorney generals office have colected close to 2 grand on a tax for that was filed on a normal state form instead of a part year resident form. Indiana was fine with us filing the wrong form over there. where we made 85% of our income. All the numbers we and are to this day right, I just used the wrong form, when I recieved the letter saying they redid my taxes, I believed we had fullfiled our obligation to the state. We have filled and recieved refunds every year since.

    Then they say the tried to contact us, but did not have our address and or phone number. I explained both were on each 1099 we filed since 2002. they could not find us till 5 years later? gimmie a break.

    Ohio saw that the amount we claimed was what we made in ohio, and since it did not line up with the IRS number, they redid or taxes for use, and said we owed 256 bucks, instead of 168 refund. we mailed a check for 256 the next day and have the original copy of the canceled check. they dropped it till this year, but have taken close to $2000 between then and what the bill we recieved this year was for. we have copies of every letter and phone call with names and dates we made to ohio.

    the ohio dept of taxes and the attorney general both have different ammounts we owe, and they are not even close to each other.

    when I went back over it, we did everything right (they owe us the 168 refund from 2002.) and they owe us close to $2000 that they have taken from us against the law.

    My parents set us up with a appointment with their CPA, he is good, their returns involve millions of dollars every year.

    Since I am disabled, and have had to deal with their harassment for 6 years, I wonder if I can sue the Ohio dept of taxation and or the attorney generals office, and for what amount. I hope he says we can sue them, I know you cant sue the IRS, but I read you can sure state level.

    I believe we are due $30,000 in interest, lost wages, and time, plus pain and suffering.

    Does anyone know if I can and for how much? they owe me $2100 bucks, plus I want interest, they charged interest and assorted fees, for the amount they said we owed them(close to $500), they would never say what the assorted fees were. they just kept transfering me between the two agencies, I guess hoping I would give up and just pay them more money they have been stealing from my family. this is theft plan and simple in my eyes, no different than someone stealing my identity and racking up bills.

    We were forced into bankruptcy in 2003, and are now behind on credit card debt close to $3000, because we did not recieve money legally due us by the state.

    I had to see my doctor several times to deal with the stress and was put on 3 medications from the trama. I have doctors that will back me up on this.

  4. tammy says:

    I have a friend that is on disability benefits and (SSI benefits).but she did not make $3000.00 on disablity and was told she can not count ssi because they do not send a 1099 on it. But she did make $200.00 over the year baby sitting my kids here and there can she clam that even though I did not send her a w2 form?

  5. eric says:

    I would becareful about reporting any income, especially because she is on SSI. they can yank that check at any moment. its not like regular disability. I qualified for SSI for 1 month, the next my wife got a job and they pulled my SSI the day she was hired. There is a "free legal advice" site on the net. the people wit alot of posts are attnys. I think you have to register, but then find the section her question is about, SSI, and ask away, make sure to post the state she lives in so the advice given will be based on case law for her state.

    Hope it helps.

  6. Raymond says:

    Tammy,

    Eric's opinion is something your friend definitely should think about. Other than the social security income (SSI), if your friend reports additional earned income made through so-called under the table means, she may be placing her qualified SSI benefits in jeopardy.

    If your friend is intent on qualifying for the tax rebate however, most income sources can be counted for tax rebate income qualification purposes, including your friend's babysitting income. She'll just have to add up enough to hit the magic number of $3,000.

  7. joy says:

    Hi I have a story like tammy, I am a mother of two, me and my husband was broke up before 2007 I am on ssi and disability my son he is 14 and cut grass last summer made about $50.00 I did not make $3000.00 by $39 can I claim his money?

  8. Raymond says:

    Joy,

    You can only claim your child's unearned investment income on your own tax return. Unearned investment income includes dividends, interest, and capital gain distributions, but does not cover earned income sources like wages from lawn mowing or babysitting. You will be unable to include your son's wages on your own federal tax return for tax rebate qualification purposes.

  9. joy says:

    ok thanks What about yard sale money would that count on the economic stimulus rebate check?

  10. Raymond says:

    Joy,

    Generally, all profits from garage and yard sales are considered taxable income. However, the profit is only the excess part that exceeds the basis of the sold items. The basis cost is the price that you originally paid for the item. Since the vast majority of garage and yard sale items are sold at heavily discounted prices, most of the so-called profit is in fact a loss - not resulting in taxable income. An exemption of course would be if the yard sale item was a fancy art painting that had appreciated in value. Any excess gain from the sale then would obviously be considered income.

    In your case, I am presuming you did not sell a product that had appreciated in value. Thus, you probably didn't generate taxable income from your sale and wouldn't have extra income to contribute towards the tax rebate income qualification threshold.

  11. eric says:

    any income gain would have to have hppened in 2007 as well. you cant claim money made in 2008 on your 2007 tax return.

    just FYI

  12. M. Deas says:

    I just got married 8/31/2007 and filed married filing seperate. My AGI calculated at 38,000 because I had to withdraw a retirement fund of 8,000 and my husband made roughly $22,000. My questions are 1)Do we both qualify for the Economic Stimulus rebate check? and if so what amount would each of us be entitled to?
    2) We have one child together and I claimed our child our on my return because my AGI was more than my husband's. Will I recieve a credit for our child and what amount should I expect?

  13. Raymond says:

    M. Deas,

    The IRS has a useful and on-point tax rebate posting about the tax rebate effects of those submitting their tax returns as "married filing separately". Check out Example #6.

    In response to your specific questions:

    Based on the information provided, yes - you and your husband both qualify for a tax rebate. Presuming you both paid taxes, with you claiming the child as a dependent, you should receive $900 - the basic stimulus payment of $600 plus $300 for the child. Your husband, filing as married filing separately as well, should receive a $600 stimulus payment.

  14. James says:

    I am a 21 year old student who let my parents claim me this year because they said they would pay the difference. I made over $13000 and they keep telling me that I would only get $300 if I were to claim myself.... I keep telling them I would get the $600. I had taxes withdrawn from my checks and such but I ended up getting a refund from both state and federal. What do you think? They trying to screw me over or what? I am single. They said something with the student part has something to do with me only getting the $300... Set me straight please.

  15. Raymond says:

    James,

    Based on the information you've provided, I believe you are correct, and your parents' statements regarding the tax rebate are wrong. Based on your income of around $13,000 with taxes paid, you are well within the qualification limits for a $600 economic stimulus rebate.

    Your student status has no effect on your tax rebate qualification. However, because your parents claimed you as a dependent, this will effectively disqualify you from receiving any rebate. I hope you guys can sort things out. Your parents can always file a 1040X to amend their return.

  16. D McMillan says:

    I have a lien on tax returns due to child support, if I don't pay owed taxes on April 15th, will the stimulus payment go towards my owed taxes or go to my exwife for back childsupport

  17. Raymond says:

    D McMillan,

    I am not entirely clear what you mean by "If I don't pay owed taxes on April 15th".

    If you don't file your taxes at all, you will not receive a stimulus payment at all since filing is a requirement to receiving a rebate. If you do file though, since there is a lien on your tax returns, the stimulus payment will be intercepted to satisfy the child support debt like any other tax refund.

  18. Jessica says:

    My husband and I filled MFJ we have 2 kids under 17. Our AIG was 35,000 and we already filled or taxes a couple of months ago. I'm a stay at home mom with no income. ($1,800 back right?)
    But I have a quick question. I know family members have received a letter in the mail stating that they qualify for the rebate and this has been about a week ago. We haven't received this letter and I'm a little conserned should I be?

  19. Raymond says:

    Jessica,

    I wouldn't worry about not having received the letter. The letter was a standard template letter with no new information. It doesn't indicate that you actually qualify for a rebate, but is merely a reminder notice to file your taxes if you want to qualify for a tax rebate payment.

    Take a look at the IRS letter's contents in this article.

  20. Fifi says:

    Regarding D McMillan's post from April 1st, 2008 at 1:28 pm -- Raymond, I think I understand her/his question because I'm in a similar situation and I'd like to restate the question. I owe for 2007 taxes but can't pay the amount until I get another job (I was laid off a few months ago). So when I file the 2007 tax return but don't pay the taxes owed (yet), will the stimulus rebate be applied to the amount owed for my 2007 taxes OR to the past-due debt (in my case a very old student loan in default, in DM's case above it's child support) for which there is already a tax lien? For the past 5 years or so, all my tax refunds have been applied to the old student loan, FYI. Thanks in advance for your reply.

    Incidentally, for anyone who's currently getting a student loan: pay it off as soon as you can! Mine has followed me for 26 years so far, believe it or not, and although it was originally for a small amount, over time it has ballooned from the interest charges and I now owe more than ten times the original amount -- and counting. It's in collections now and although the IRS sends a letter each year saying that the refund was used to offset the loan, the amount of those refunds ($1,000 last year alone) does not show up on the collections statements. It's difficult to determine who actually holds the debt, but the IRS takes my money each year while the collections company just keeps increasing the amount. The amount owed never goes down, only up. So yeah, learn from my mistake if you can. It's been the biggest financial albatross of my life, and will never go away. Even if I were to claim bankruptcy, student loan debts are not eligible for discharge so I will always owe them no matter what. And I don't make enough money to actually pay them off. Depressing!

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