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:

    Le,

    Unfortunately, because your dependent parents are not classified as children under the age of 17, you and your husband will not be able to claim them for the extra child tax rebate for economic stimulus plan purposes.

    Additionally, because your retiree parents do not have at least 3,000 in earned income (which for economic stimulus plan purposes also includes all otherwise non-taxable Social Security benefits), they do not satisfy the minimum threshold of $3,000 for tax rebate entitlement.

  2. Kathy says:

    My husband and I filed chapter 13 bankruptcy in Jan. 2008. Will we be able to
    keep our rebate?

  3. Raymond says:

    Kathy,

    This is a very good legal question for which I have no solid definitive answer. It is an issue that may have to be advised and litigated by your attorney as he or she so chooses.

    The first step is to determine the position that your Chapter 13 bankruptcy trustee intends to take. The case would be moot obviously if he or she chooses to deem the economic stimulus tax rebate as an exempt asset from trustee control.

    However, in my opinion, I think the tax rebate amount will likely have to be sent to the trustee unless it was exempted at filing. Since the tax rebate was not signed into law until February 2008, the rebate could not have been exempted at the time of Chapter 13 bankruptcy filing. Any such tax refund usually represents an over-withholding not permitted under Chapter 13. I think the amount will likely have to go to the trustee.

  4. Thomas says:

    Me and my wife file MFJ. If we have our parents as our dependents on our tax return. They are retirees with income on SS over $3,000. Would they be qualified for a rebate? Would it be phase out with our AGI or they will receive their portion seperately?

  5. Raymond says:

    Thomas,

    There is an extra $300 tax rebate for each claimed dependent, but it is only for qualified children under the age of 17. That means taxpayers who claim an older person 17 or over as a dependent won't get the extra money.

    Individuals 17 or over who were claimed as dependents won't be happy either. The economic stimulus bill specifically makes dependents, or even those who could be claimed as a dependent, ineligible for the tax rebate. So your dependent parents who were claimed by you and you wife won't get rebates even if they held jobs or otherwise had Social Security income that otherwise would have qualified them for the tax rebate money.

    In the alternative, if the financial numbers makes sense, one option is to amend your tax return and remove your parents as dependents. If you do that, they will be able to separately qualify for the tax rebate on their own (they will need to file their own 2007 tax return however). Of course, you and your wife will probably end up paying more in taxes.

    So it's just a matter of shifting tax money around.

  6. Candice says:

    My husband and I have 4 children together and he also has 1 child from a previous marriage. We filed our taxes as married filing jointly and claimed all 5 children. Our AGI was around $43,000. Im a stay at home mom. So based on this info can you tell me what our stimulus check amount may be?

  7. Raymond says:

    Candice,

    You and your husband are in luck! The current stimulus plan imposes NO limit on the number of child based rebates that a family may be entitled to. As long as you claim all five children as dependents on your federal tax return, the IRS should be able to do the math.

    Based on your married filing jointly AGI of $43,000 and presuming the numbers you've provided are accurate and that you did have to pay taxes, I calculate that you will be entitled to a big fat whopping rebate check of: $2,700.

    Remember to use the money wisely!

  8. Tracy says:

    I'm currently going through a Chapter 7 bankruptcy, but it has not been filed yet. Will I get the stimulus check, or will I have to pay it back?

  9. Raymond says:

    Tracy,

    In regards to your anticipated Chapter 7 bankruptcy filing, you will likely lose your economic stimulus tax rebate check 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.

    As always, consult an attorney for further detailed guidance.

  10. CHRISTINA says:

    IS THERE A SPECIFIC WAY THE IRS IS HANDING OUT THE REBATES? ONLY BECAUSE I HEARD SOMETHING IN THE MATTER OF THEY ARE GOING BY THE LAST 4 DIGITS OF YOUR SOICAL SECURITY NUMBER. CAN YOU CLEAR THAT ONE UP? THANKS

  11. Raymond says:

    Christina,

    There seems to be much online speculation about the way and the order that the tax rebate checks will be sent out. The advanced refund tax rebates in 2001 were distributed according to Social Security Number, and related rumors seem to be surfacing again. After doing some research, I have not been able to confirm that piece of information, so at this time being I must continue to view that as mere speculation.

    While I do know the IRS is rapidly trying to assemble an orderly distribution system, they have not yet announced the order in which the 2008 tax rebates will be sent out.

    I recommend regularly checking out the IRS Economic Stimulus Payments Information Center website link. It's the only official source of information regarding the tax rebate.

    Of course I will continue to post significant announcements as they are officially released.

  12. will says:

    My wife and I recently were informed that our tax refund check was being offset and applied to an old school debt of hers. How will this affect our stimulus check. I will be filing an injured spouse claim soon.

  13. Raymond says:

    Will,

    Based on the information you've provided, I presume your wife's old student loans are currently in default. As a result, 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 as well. Unless the student loan debt is paid off or missed payments are made current, your rebate check money will likely be siphoned off to pay for the outstanding loan.

    As for your injured spouse claim, the IRS has not issued any special claim forms as of yet for the matter so I would just go ahead and file the regular Form 8379 claim for Injured Spouse Allocation. If your claim is successful, your tax rebate amount should be split 50/50, including the amount for each qualifying child if any.

  14. Chris says:

    My wife and I had a 2006 tax balance to the IRS which is being paid on under my wife's Chapter 13 payment plan. Will we still get our stimulus check or will it go to her trustee ?

  15. Raymond says:

    Chris,

    I am unable to provide you a very definitive answer to your question because it depends on how your Chapter 13 trustee views such windfall tax rebates that are not linked to the pre-filing overestimation or overpayment of taxes.

    Normal tax refunds are part of the 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 governmental free money as there is no underlying overpayment of taxes.

    Since the answer may be subjectively 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 pressing issue. My guess is that more likely than not, because you are already in the midst of Chapter 13 restructuring, 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 on a case by case scenario before releasing any amount to you (if release is the approach the trustee is willing to agree to).

    However, that's just my view.

  16. maria says:

    My husband and i filed MFJ and income over $174,000. we have 1 child will we get a check on the childs behalf?

  17. Raymond says:

    Maria,

    Since you and your husband exceed the married filing jointly threshold, you will not qualify for the tax rebate. Your extra qualified child rebate of $300 will phase out completely if your Adjusted Gross Income is $180,000 or more. Anything less than that, you may get a partial tax rebate.

  18. M.J. says:

    bankruptcy excludes EIC child credit from tax refunds sent to trustee. why not the stimulus rebate??

  19. Raymond says:

    M.J.,

    Whether the earned income credit (EIC) is permissibly exempt from your bankruptcy trustee's control is dependent on your state's relevant laws and the court's interpretation. Some states have enacted statutes expressly excluding "public assistance benefits" from bankruptcy collection (presumably that includes the earned income credit). But not all states provide for this EIC exemption in bankruptcy matters.

    I do not have a definitive answer to your question, but it's definitely a legal question a bankruptcy attorney may be able to more competently respond to.

    If I had to make an assessment though, I would probably say that the tax rebate might not be exempted as a public assistance benefit under any relevant state EIC exemption because the tax rebate is also claimable by higher income individuals. Even married filing jointly couples with one child who have adjusted gross incomes of $174,000 a year qualify for the tax rebate. In contrast, the earned income tax credit only benefits very low income families.

  20. ashraf says:

    i made exactly 2958 in 2007, should i wait to file my taxes till next year, or will i still get my 300 dollar rebate check

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