dcsimg

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.

Disclaimer: Discover is a paid advertiser of this site.
Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.

Feed for this Entry

405 Responses to “Breaking Down The Details Of The 2008 Economic Stimulus Plan and Your Tax Rebate Check” 

  1. Raymond says:

    LC,

    If your parents filed taxes and claimed you as a dependent for tax purposes, you are disqualified from receiving a tax stimulus check even though you 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 claim you as a dependent for TAX purposes, then you may be entitled to a rebate.

  2. jim says:

    I was informed by an accountant that if I received a $1,200.00 Bush rebate in 2008 and I am entitled to received a $2,000.00 refund in 2009, the IRS will deduct my 2008 $1200 dollar Bush rebate from their 2009 refund resulting in a actual refund of $800.00. Is this correct?

  3. Raymond says:

    Jim,

    There is much confusion on this tax matter and understandably so. I will try to explain.

    To clarify, the 2008 economic stimulus rebate that we are all applying for by this year's April 15, 2008 filing deadline is based on 2007's tax return. However, it is actually a sort of "modified" credit towards your future 2008 tax return. If your income and tax situation doesn't qualify you to receive the rebate this year in 2008, you are permitted to file and qualify for it again in April 15, 2009 when you file your 2008 tax return.

    The advice your accountant provided you appears to be incorrect. My understanding is that if you receive a stimulus check this year, the IRS will not offset it later on in 2009 when you file your 2008 tax return even if for example, your life situation changes and thereby entitling you to a lesser stimulus rebate amount had you waited until 2009, when you filed your 2008 return.

    Thus, to address the specifics of your situation: The IRS should not deduct your $1,200 stimulus rebate check amount from your $2,000 tax refund filed in 2009 arising out of your 2008 tax return. If your tax rebate stimulus check was only a mere offset of your future tax return, it would be nothing more than a mere loan. But Bush's economic stimulus checks are true tax rebate credits.

  4. CHALAH says:

    I F I HAVE A DEBT WILL THIS REBATE CHECK BE OFFSET IN ANY WAY?

  5. Raymond says:

    Chalah,

    Ordinary debt, such as credit card or even mortgage debt, has nothing to do with entitlement to the 2008 economic stimulus rebate check. As long as you pay taxes and have adjusted gross income that is within the threshold amounts, you will receive a rebate.

  6. sarastearns says:

    Just a quick question, I am a homemaker and my husband made 42,000 this year. Would we get the 1200 plus kids , or would it be 600 plus kids? Also we filed in January would we still receive it in may?

  7. Raymond says:

    Sarastearns,

    Based on the details you've provided, I presume you and your husband filed your tax return as "married filing jointly" and that the $42,000 amount was the adjusted gross income (AGI) amount. I am also presuming that you and your husband ultimately owed some taxes on the return.

    In that case, it appears you will be entitled to the full $1,200 rebate plus an additional $300 for each child you have. You fall within the qualification threshold. Having filed your tax return in January and before the April 15 deadline, you are on track to receive your full economic stimulus tax rebate check by the projected May estimation.

  8. Ray says:

    It says dependents under 17 years of age not 17 and under. I have a brother that is 17 so does that mean my mother wont get the extra dependent money?

  9. Raymond says:

    Hi Ray (I like your name by the way),

    But, yes, unfortunately your statement is correct. Because your brother is already 17, he cannot be classified as an under 17 child dependent for tax rebate purposes. Your parents will not be entitled to the extra child dependent credit of $300 when it comes to him. :(

  10. Bruce says:

    I'm in the Maybe Category. AGI over $174,000 with 3 kids under 17. Will I get $900 for the kids or is it a partial payment?

  11. Raymond says:

    Bruce,

    Running some quick math on my trusty calculator here, I would say that if your AGI exceeds $174,000 by $18,000, your 3 child rebates would be phased out completely as well.

    You did not list your exact AGI information, but if your adjusted gross income is more than $192,000, you won't be entitled to the full Bush tax rebate.

  12. Colleen says:

    My husband and I filed bankruptcy 11/2007. We rec'd a discahrge 02/2008. Will we have to return the 2008 rebate check??

  13. Raymond says:

    Well Colleen,

    Just a little disclaimer that bankruptcy law is not my legal background. But based on my understanding, since you filed for bankruptcy protection in 2007 when you were not yet due the tax rebate, and presumably since the estate trustee has made no effort to claim the rebate prior to discharge, you should be able to keep the full tax rebate amount.

  14. Nik says:

    This stimulus package discriminates against the very people who need it the most.People who are on SSI don't qualify for some stupid reason.....aren't they citizens also....

  15. Raymond says:

    Nik,

    The economic stimulus package passed because of compromises in the Senate that expressly mandated the inclusion of Social Security income recipients into the mix of those who will qualify for the tax rebate. Although Social Security generally isn't high enough by itself to qualify as taxable income because it doesn't exceed the base income threshold, Bush and Congress are allowing the amount to factor towards the tax rebate calculation I've outlined in the chart above. I think they clearly are not being discriminated against, despite the way you've described.

  16. Shawn says:

    I'm a single parent of two and self employed and my (AGI) was 12,704 do I qualify for the Stimulus Rebate Check. and I paid self employment taxes of $1931.00

  17. Raymond says:

    Shawn,

    Based on the information you've provided and presuming the accuracy of the numbers - you will be entitled to a tax rebate check of $1,200. This includes $600 for your single filing status with taxes paid, and two sets of $300 for your children.

    Even if your filing status was Head Of Household rather than single, do note that for tax rebate purposes, Head of Household is being treated the same way as filing single. Thus, if your filing status is anything other than "married filing jointly", the adjusted gross income limit for rebate purposes is generally $75,000.

    You are precisely who the economic stimulus plan was designed to target. Remember to spend/save the amount wisely when you receive the check in May. That's the anticipated tax rebate check delivery date.

  18. Ron says:

    I'm still a little confused on the SS aspect of the rebate. My wife & I had only $2760.00 of earned income, $1500.00 IRA withdrawal & our Social Security. However our SS doesn't even show on our tax return because the worksheet says it isn't high enough to be taxable. ??

  19. Raymond says:

    Ron,

    Entitlement to the economic stimulus tax rebate is something the IRS will calculate for you. Your job is just to make sure you filed timely and with accurate data.

    Your Social Security income, although not considered taxable because it's below the threshold test, will still be factored by the IRS towards tax rebate qualification. My understanding is that the IRS will match your total Social Security benefits to you and apply it towards the tax rebate qualification test to see how much you are entitled to despite the information not being expressly reflected on your personally filed income tax return forms.

  20. Le says:

    Me and my husband file MFJ. We have AGI over $174,000. We claim both of my parents as dependents. They are retiree over 70 yrs old and live on SS, with income less than $3000. Are our parents qualified for a tax rebate? How would it affect our tax return?

Leave a Reply



If you liked this site, please Add To Bookmark and/or Subscribe To A FeedReader

Search this site