Tax Rebates for Individuals
The Economic Stimulus Act provides a tax credit against 2008 taxes. The amount of the credit is $600 for individuals, $1,200 for married couples filing a joint return, or the net tax liability if that amount is lower. People will receive an additional rebate of $300 for each qualifying child.
People will receive their rebate checks from the IRS starting in May. Individuals with at least $3,000 of earned income will receive rebates of at least $300, or $600 for a married couple filing a joint return. People receiving Social Security benefits and veterans disability pensions will receive a rebate check of $300 as well, even though they might have no tax obligations.
Who's a Qualifying Child?
Many taxpayers are wondering who's going to get the rebate checks for their kids. "Child" for the purposes of the tax rebate means any child under age 17 who is related to you by blood, marriage, adoption or foster arrangement and whom you can claim as a dependent. This is the same definition of a child as the one used for the child tax credit. What this means, basically, is to get the extra $300 per child rebate, you will need to claim that dependent on your 2007 tax return. If you are not eligible to claim the child, then you won't be eligible for the extra rebate either.
Phaseout Limits
The tax rebate is reduced ("phased out," in tax lingo) once your adjusted gross income reaches $75,000, or $150,000 for joint filers. Your rebate will be reduced by 5% for income earned over this threshold. "The $600 credit for individuals, therefore, phases out completely at $87,000 of AGI, and the $1,200 credit for joint filers phases out completely at $174,000 of AGI," according to the CCH Tax Briefing (pdf).
You Don't Have to Pay the Rebate Back
Unlike other advance tax credits, you won't have to pay back the rebate you receive when it comes time to file your 2008 taxes. If it turns out that you were eligible for a higher rebate amount when you calculate your taxes, the extra amount will be refunded to you when you file next year. If it turns out that you were eligible for a lesser amount, you won't have to pay back the rebate.
When Will You Get the Rebate?
Rebate checks will be mailed out as early as May, according to the IRS. Also, the IRS will calculate the amount of your rebate and mail you a rebate check, based on information in your 2007 tax return. So you'll need to file your 2007 taxes first, before you can get the rebate check. Many people file an extension and that extends the filing deadline until October 15, 2007. Your rebate check won't be mailed out until after you file your 2007 taxes. In any event, rebate checks won't be mailed out after December 31, 2008. So taxpayers filing returns late in the year may see their rebates show up on next year's taxes instead of as a separate check from the Treasury.
Some people have outstanding tax debts, child support in arrears, and defaulted student loans, for which the IRS takes their refunds and applies it their debts. These early tax rebates will be offset and applied to those debts just like any other tax refund. If you need assistance with these applied refunds, you can contact the Treasury Offset Program at 1-800-304-3107.
Don't Fall for Any Rebate Scams
As with any tax refund program, there's potential for unscrupulous people to concoct spam email and fake web sites promising to help you get your rebate. Don't believe it. The IRS will be doing all the work on this program, all you need to do is file your 2007 return as you normally would, and wait for the IRS to do the rest. If you have any questions or concerns, you can call the IRS directly at 1-800-829-1040.
Tax Incentives for Businesses
Bonus 50% depreciation for asset purchases. Business owners would be able to take a deduction for half the cost of new equipment and other fixed assets.
Increased expensing limits under Section 179. Businesses will be able to deduct up to $250,000 of the cost of new assets, double the $125,000 dollar limit in effect for 2007. Section 179 is a tax provision that gives business owners the option of either deducting the cost of new assets right away, or spreading out the cost over time using depreciation methods. Both the bonus depreciation and the higher Section 179 limits in effect encourages businesses to purchase computers, furniture, machinery, and other assets.
Higher dollar limits for conforming mortgage loans. While not related to taxes, lawmakers agreed that the government-backed mortgage agencies Freddie Mac and Fannie Mae would be able to purchase loans as high as $729,750, up from the current limit of $417,000.
More news and information:
- Rebate Calculator [Kiplinger]
- Rebates: What you need to know [CNN]
- Congress Votes for a Stimulus of $168 Billion [NYT]
- Information on Stimulus Package [IRS]
- Economic Stimulus Act of 2008 Legislative Texts and Summary [Library of Congress]
If the rebate is only an advancement on next year’s refund, I DON”T WANT IT! Can we send it back? Should I not withhold taxes from my income this year just to come out $1600 to the good? This is crazy!
It appears the plan does not include college age students claimed as a dependent by their parents, even if they have earnings over $3,000.
RE: Rick’s comment: I can’t tell if a college student is barred if he/she has earned income over $3,000 just because the student can be claimed as a dependent on our return. I don’t see being claimed as a dependent disqualifies you?
I owe federal taxes of $186.00… i am not sure that i will have the money by 4-15. Can I have them take the payment out of the rebate?
TRISHA [...] What part of you don’t have to pay it back do you not understand…
Lisa: what I recommend is filing your 2007 tax return. And if you cannot pay it, call the IRS and ask for a 120-day hold on collections. Explain that you plan to pay your tax in full from the rebate. The IRS should automatically apply the rebate to your balance, and then send you any overpayment.
What if your AGI is over $87,000 for an individual filer, but you have two dependents. Do you at least get the $300 rebate per dependent?
Based on this article, it sounds like the money is an advance on your refund from this year’s (2008) taxes – it would be deducted from what you may receive back when you figure your taxes next year. Or, if you don’t get a refund on this year’s (2008) taxes, you don’t have to pay it back. It sounds like it’s just shuffling money. You can have it now, but you won’t have it later.
This assumes you would be actually due a refund. If not, then I guess it really is “extra” money. Either way, I’m happy to have it to invest & earn additional money throughout this year. But many people spend every cent they have (and then some!), so I guess it will help stimulate the economy – for now.
If the gov’t really wants to stimulate the economy, they should put the money back in the hands of the people who earn it. Permanently reduce taxes. I guess that means that gov’t spending should also be reduced.
Regarding dependents, the rebate is denied to “any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins”
Section 151 is the dependency exemption, therefore dependents claimed by another are not entitled to their own rebate.
Regarding Trish’s comment, she made an understandable mistake given that our last special refund (2001) was exactly what she feared, a refund of withholding due to a mid-year change in the withholding tables, and it was required to be claimed on the return as a reduction of current year w/h.
Question for my mom…she would like to know that since she only gets SS and SSI and has never had to file taxes since she is below the limit to do so, if she has to this year to receive the rebate?
The IRS has said that they are working with the Social Security Administration to come up with procedures to simplify this whole process. I cannot imagine, personally, that the IRS would want to process a bunch of non-taxable returns this year. So, the best answer I can give right now is to stay tuned, but I don’t think she’ll have to file.
My wife and i both get Social Security disabilty benefits are we eligble for the rebate,even though we paid no taxes for 2007.And if so do we need to apply for the rebate,and is the rebate $300.00 for both of us or is it $300.00 each. THANK YOU Kennie Smith
Kennie: you should receive a rebate of $600 as a married couple on Social Security.
I would just like to have it clarified if anyone out there know the answer to this question? If a child 17 or over who is claimed on their parents income tax return as a dependent but who files their own taxes and has earned over $3000 – will they receive their $300 refund? If the parents are not eligible to receive it because they are over 17, shouldn’t they receive it?
Brenda: No, dependents are not eligible for the rebate.
Question: Economic rebates. When we file our income taxes each year we usually get about $500 back from our federal tax return. We have been told that when we file our 2008 tax return we will probably owe $700 because we have to pay back the $1200 rebate we will be getting this summer. Is this correct?
If you get 1,200 rebate and only get 700 refund ror 2008 you don’t have to pay the difference. And du yes it comes out of next years taxes.
So.. this means you have to have earned atleast $3000 in order to get the money? I am in school and i only made like 1500 last year but i have a child also. Will i still be able to collect?
My husband and I are living on pensions and social security. We are paying taxes on the pensions and the soc.sec. I noticed regarding this tax rebate that pensions are not considered “earned income”. If this is the case why do we have to pay taxes on them? We thought we would receive the $1200, and now it looks like we will only get the $600 for the social security.This does not seem fair to me.
So, it this tax credit a way to stave off a recession until the Democrats get into office?
Do I understand this right. My husband and I owe taxes from last year that we pay monthly. Will our rebate be deducted from this amount. Unfortunately we owe more than the rebate.