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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. Raymond says:

    Rachel,

    I am not clear whether you have filed Chapter 7 bankruptcy already or whether you are merely in the process of getting ready to file for Chapter 7.

    If you are planning to file bankruptcy before you receive your economic stimulus tax rebate, the tax rebate is a potential asset that should be listed on your bankruptcy filing paperwork. If you are filing Chapter 7, you may be required to turn all or part of the rebate over to your trustee unless it can be successfully claimed as exempt under the laws applicable in your jurisdiction. Federal and state laws provide different exemption rules, although some states allow you to utilize federal exemptions if they are more favorable.

    Whether the tax rebate is exempt is a question your bankruptcy attorney will be more qualified to answer. Some states provide exemptions for public benefits, including public assistance (welfare), social security and unemployment compensation. I am unable to give a definite answer as to whether the stimulus tax rebate qualifies as a public benefit however.

  2. Tony says:

    I have filed 2007 tax returns (married filing jointly) and got a refund already. My AGI is $74000. My wife doesn't have SSN and so I filed it using ITIN. I heard that IRS will not pay any rebate if ITIN is used in the tax filing. I have a child of 1 year age. What will happen in my case?

    Note: My daughter and I have SSN's.

    Thanks
    Tony

  3. Raymond says:

    Tony,

    Your exact question has been perfectly addressed by the IRS as one of their official frequently asked questions. Take a look here (link).

    To summarize, if you filed single with only a Individual Taxpayer Identification Number (ITIN), you will not be entitled to a stimulus tax payment since only those with a valid Social Security Number (SSN) are qualified to receive one.

    If married filing jointly, both taxpayers must have valid Social Security Numbers. If only one spouse has a valid Social Security Number and the other only has an ITIN, jointly, you will not get a stimulus payment.

    However, Tony, if you file your own separate return instead, you may qualify for a payment, based on your own income credits and deductions. You may also claim your daughter for the child rebate if you submit your federal tax return as married filing separately, since she has a valid SSN. Good luck

  4. Diane says:

    I have retained a lawyer for chapter 7 bankruptcy.Will I get a rebate?My husbands on disibility.

  5. Raymond says:

    Diane,

    I would need to have more details regarding your situation to clarify a proper response. I would need to know your total Adjusted Gross Income (AGI) and whether you have actually filed Chapter 7 yet.

    To give you some general guidance, I am presuming you have sufficient AGI to get over the tax rebate threshold, and I am also presuming you have not yet filed Chapter 7 but have merely retained a bankruptcy attorney.

    However, even if you are entitled to a tax rebate check, it is likely your tax rebate payment will be classified as a potential asset and listed on your bankruptcy claim. You may be required to turn all or part of the rebate payment over to your trustee unless you can properly claim exemption based on the laws applicable in your jurisdiction.

  6. Tony says:

    Thanks for the clarification!

    We are in the process of applying for an EAD for my wife and then get an SSN.
    I would like to know if I can claim this stimulus payment by filing an amendment later this year, after my wife receives SSN. If it is not possible this year by an amendment, can we claim it next year as part of 2008 tax filing.

    I appreciate your help!

    Thanks
    Tony

  7. Raymond says:

    Tony,

    If you can't claim a rebate now, you can claim it later.

    The stimulus rebate everyone will be receiving shortly is actually an accelerated tax rebate for 2008. Thus if you don't claim it during this year, when you file your 2008 federal tax return on April 15, 2009, you can claim it then. The IRS is simply giving taxpayers the option of claiming it now rather than at the later time.

    If you can't qualify for the tax rebate at the present time you can claim it when you file your 2008 tax return. As for filing a 1040X amended return if your wife receives a SSN during this year, I would certainly go ahead and do that. At the very least, your tax rebate check will merely be delayed. Better late than never!

  8. Julie says:

    Our trustee ( BK13 ) does not request our refunds each year. We can keep them. I was also told that we can keep our stimulus, so I guess it is PER district.

  9. Ben says:

    I am a student that made about 20,000 last year. However, I also took out 8,500 in Stafford subsidized loans. Do the loans affect whether or not I can receive a rebate? Thanks!

  10. Raymond says:

    Ben,

    Your Stafford subsidized student loans have no bearing on you receiving your economic stimulus payment, unless they are currently overdue. Since you are still a student, I presume they are not. You should qualify for a tax rebate.

  11. Andrea says:

    I heard that the tax rebate checks are comming out of our 2009 tax refund, is that true? Is this really not free money?

  12. Raymond says:

    Andrea,

    The current economic stimulus payment is an accelerated rebate from your future 2008 tax return. The IRS is simply giving you the option of claiming it now, rather than at the later time. It is indeed "free money". The rumors that the tax rebate will be deducted from your 2008 tax refund are false.

  13. KATHY says:

    my daughter recently divorced has no income except ssi diability on a 3 yr old child. Former husband owes back child support on child that is now almost 19. Exwife has attached his fed tax returns for the past 5 yrs and state refunds. This year he filed taxes and claimed the 3 yr old. He has a refund of approx.500.00 dollars will he be eligible for the rebate for him and the child? What sould my daughter do about her filing a fed refund for herslef? Can she file for the earned income credit on her child she is raising now or in the future?Will she be eligible for the rebate this yr?

  14. Raymond says:

    Kathy,

    Your case has multiple issues and questions that would be more competently addressed by a tax attorney. I'm unable to offer you an accurate opinion at this time due to the lack of further details.

    However either way, in accordance with their dependent tie breaker rules, the IRS will likely want to ask both parties for information to determine who is properly entitled to claim the 3 year old child as a dependent.

  15. katy says:

    I owe this year, will my tax rebate be applied to the balance due if I have not paid the taxes in full?

  16. Raymond says:

    Katy,

    Normally the IRS has to issue you a tax assessment and formal Notice and Demand for Payment before it will start taking your tax refunds to satisfy the outstanding tax liability. I anticipate the tax rebate to be the same. You will likely receive the rebate despite owing taxes for the year. However, bear in mind that if it's left unpaid, you will receive a tax bill that includes interest and penalties. Thus you should try to pay off your tax liability sooner than later.

  17. Diane says:

    Retained lawyer for chapter 7 bankruptcy.We have no tax liability.Havent filed in years.Living off disibility.So,can we claim stimulus rebate.Even with the means test for my bankruptcy it would still pass.

  18. Raymond says:

    Diane,

    I would need to know the total amount of your disability income to tell you whether you qualify for a stimulus payment at all, but I presume you have enough to qualify for one.

    Whether your Chapter 7 bankruptcy filing will affect your stimulus payment depends on whether you've already filed your bankruptcy claim or not. Since you've only retained the lawyer, I presume you haven't filed yet. If you are already in a bankruptcy, the tax rebate may have no affect on you at all. If you are filing a Chapter 7 claim, you may be required to turn all or part of the stimulus rebate over to your Chapter 7 trustee, unless the amount can be claimed as exempt under the laws applicable in your jurisdiction.

  19. eric says:

    I am on disablity, my wife makes the bulk of our income. I have a tax offset, but for the last 5 years we have recieved 100% of our refund because she makes the most money, and my ssa-1099 does not seam to be enough to count.

    We have already filed or 2007 taxes and recieved our refund last week, again we recieved 100% of the line 73 amount. we do file a injured spouse form each year.

    since we have already filed, and the injured spouse form was included, do we need to file anything further? I have read that they will take 50% of the stimulus payment. Will this be the case for us since we always recieve 100% of our tax refunds?

    thank you in advance.

  20. Raymond says:

    Eric,

    Since you indicate that for the last few years the IRS has let you keep nearly 100% of your joint tax refund due to your wife's injured spouse claim, I presume you are living in a non community property state that assesses refunds based on income proportionality. Thus, based on your situation and the facts you've provided, my assessment is that you should receive nearly 100% of your joint tax rebate as well. If you've already submitted the injured spouse form, you've done all that you can do for now. Just hang tight until May.

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