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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:

    Ashraf,

    Because your 2007 adjusted gross income is less than $3000, you will not qualify for the tax rebate this time around.

    I would wait until 2009 to file your 2008 tax return and claim it then. Hopefully you should earn enough to qualify at that time.

  2. Brandy says:

    my hubby and I filed chapter 13 in 2004, we do not get tax refunds anymore, they go to the bankruptcy courts. According to the calculator, we qualify for a rebate but will we get one or will it go to the trustee?

  3. Raymond says:

    Brandy,

    Unfortunately, I am unable to provide you or your hubby a very definitive answer. It will depend on the practice and views of your Chapter 13 trustee. Normal tax refunds are part of the usual bankruptcy estate and debtors must turn over future tax refunds to the bankruptcy trustee. However, the 2008 tax rebate is not in the nature of a true refund, akin more to some special governmental type assistance as there is no underlying overpayment of taxes.

    Since the answer may be based on the perception and views of your bankruptcy trustee, I suggest that you solicit the services of your attorney to inquire the trustee about his or her position on the issue. Because you are already in the midst of Chapter 13 repayment, my initial assessment is that you should be able to keep at least part of your stimulus tax rebate. However, in the interest of the estate, the trustee will likely want to intercept your tax rebate check and review the amount case by case before releasing any amount to you.

  4. Lee says:

    My husband and I are retirees. No working income but we have withrew $50000
    from IRA and some investment income. We paid $5000 for 2007 federal income tax. Do we get tax rebate aand how much?

  5. Raymond says:

    Lee,

    Your IRA withdrawal counts as ordinary income towards your adjusted gross income (AGI) on your tax return. Thus, presuming you went ahead and filed your tax return as married filing jointly, you will be entitled to a stimulus rebate check of $1,200.

    You indicated "$50000 from IRA and some investment income." You did not indicate how much the other investment income came out to be, but I am presuming it did not bump your total AGI past $150,000.

  6. J. Marie says:

    My husbands and my AGI was around 47000, and we have 3 qualifying children so I think we are entitled to the rebate. I have filed an injured spouse claim but have not heard anything yet. If our tax return was taken for back child support that my husband owes, will we lose our rebate check as well?

  7. Raymond says:

    J Marie,

    Because there is a child support lien on your husband's income tax refunds, your economic stimulus tax rebate check will likely be intercepted as well, that is, unless your injured spouse claim prevails.

    If you live in a community property state (such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), community assets, including a joint refund, can generally be offset to pay the liabilities of either spouse. However, filing a successful Injured Spouse claim on Form 8379 in a community property state may entitle you to recover 50% of any refund or rebate coming to you.

    In non-community property states, the IRS runs an algorithm to determine what part of the refund is due to the income, deductions, and credits of each spouse. The share of the refund that is attributable to the injured spouse gets refunded to him or her, and the rest is used to offset the debt of the other spouse. The tax rebate checks will likely be subject to the same process. It will get offset but you should be able to get part of it with an injured spouse claim.

    However, the IRS has not specifically addressed this issue yet.

  8. Amy says:

    I am 18 years of age and although I work, I can still be claimed as a dependent. Am I entitled to a rebate?

  9. Raymond says:

    Amy,

    If your parents filed taxes and properly claimed you as a dependent for tax deduction purposes, you are disqualified from receiving a tax stimulus check even though you may have had earned income in 2007 that exceeded $3,000. However, if you are merely dependent on your parents for some financial support and they DID NOT actually claim you as a dependent for tax purposes, then you may be entitled to a rebate.

    Please also note that because your age already exceeds 17 years, your parents, even if they were to claim you as a dependent, would not be entitled to the extra $300 child tax rebate on your behalf.

  10. Patrick says:

    Hi-

    I filed my 2007 taxes already and qualified for a return. Unfortunatly for me, I got behind on a student loan and now they are taking that from my paycheck and they also applied my FULL tax return to that loan.

    Given the fact that the IRS applied my return to that loan, would I still qualify for the tax releif check?

  11. Raymond says:

    Patrick,

    Because your student loans are currently in default, there is a student loan lien being placed on any IRS income tax refund coming to you. Your economic stimulus tax rebate check will likely be intercepted and taken as well. Unless the student loan debt is paid off or missed payments are made current, your economic stimulus rebate will likely be swiped to pay for the outstanding loan.

  12. mal says:

    i was wondering if you might be able to tell me how much my husband and i might get back on our rebate check if any at all. our total AGI was $22,718 and we have two kids i also do not work so we filed MFJ.

  13. Raymond says:

    Mal,

    For your AGI of $22,718 and presuming you paid taxes on that and properly claimed your two children as dependents under the ages of 17, you and your husband should receive a total tax rebate check of: $1,800.

  14. Roxy says:

    My parents are both disabled, and they get SSI.. they do get more than 3,000 a year each in disability benefits (SSI benefits).
    BUT they also get welfare (foodstamps and cash assistance) for my two sisters, one is 17 and one is 15.
    They usually don't file taxes, because of their situations.
    Should they file? wll they get any money from the stimulus? AND if they do will they have to report it to their welfare agency and will their benefits be reduced?

  15. Raymond says:

    Roxy,

    I am not certain whether your parents will need to report the tax rebate to their welfare agency, but I would have a very difficult time believing that the welfare agency would reduce their benefits based on a governmental nation wide plan to issue free money to all qualifying lower income taxpayers. The economic stimulus plan was meant to target and benefit lower income people. I do not think the welfare agency will reduce their governmental assistance because of the tax rebate.

    To qualify for the tax rebate, your parents will most definitely have to file their 2007 tax return even if they ordinary do not do so due to their lower income situation. If they do not file, they will not receive a rebate check, even if they were entitled to receive one.

    Because Social Security disability income has been specially included as income for tax rebate purposes, they will likely qualify for a rebate amount. The amount will depend of whether they owed any taxes for 2007. If they did, their joint tax rebate amount (including the child rebate for your presumably dependent sister under the age of 17) will be: $900 if they DID NOT pay taxes, or $1,500 if they DID pay taxes.

    I am assuming you cannot be properly claimed as an under-17 dependent child.

  16. Donna says:

    I have a slightly unusual case. I am SSI repecient however I am legaly claimed under IRS rules as a dependent. ( I am listed as other) I am concerned that by filing I can hurt the one who claims me, financialy. Yet I am not sure whether or not she could receive additional money because I am not a under 17yr old child, but a dependent no the less.
    what is the options for this case?
    Thanks
    D. D.

  17. Raymond says:

    Donna,

    Whether you file your own tax return or not has no tax rebate bearing on the person claiming you as a dependent for deduction purposes. However, because the $300 child rebate is limited only to those under age 17, the person claiming you will not be entitled to the extra child rebate.

    Furthermore, because someone else is claiming you as a dependent, you will not be permitted to receive a stimulus rebate for yourself. The economic stimulus bill specifically makes dependents ineligible for the tax rebate. Thus, you do not need to worry that your own filing will harm the other person's tax rebate qualification.

  18. Christy says:

    I am a qualifying widow with a dependent child under the age of 17 and a 2007 AGI of approximately $105,000. Do I qualify for the economic stimulus rebate or not?

  19. Raymond says:

    Christy,

    As a single filer with an under 17 child and an AGI of $105,000, you are completely phased out according to the economic stimulus brackets. You will not be entitled to receive a tax rebate check.

  20. rachael says:

    I am disputing a tax liability with the IRS because the liability isn't mine, its due to someone illegally using my information without my knowlege. I am also in the middle of filing chapter 7 with the tax liability included in it because the petition said I had to include all tax debts even if I am disputing them. I receive disability payments and am not usually required to file and I want to know if I will get a stimulus payment if I file.

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