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2008 Tax Rebate Stimulus Package Explained

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Money Money Money1/15: The Committee on Appropriations just released the an executive summery of the details of the American Recovery and Reinvestment Plan.

This post refers to the first economic stimulus package of 2008. You can read about the second stimulus package here.

Looks like the stimulus payments will be sent out ahead of schedule, with the 800,000 direct deposit payments on Monday April 28th, Tuesday, Wednesday, and a whopping 5 million on Friday (none on Thursday). The schedule of payments will follow the original schedule, just accelerated by a week.

No doubt you’ve heard the “great” news that a deal on a stimulus package has been reached and that checks will be in the mail as early as May. Whether you believe the naysayers that say we’re really just propping up the Chinese economy (or oil rich nations) because we’re borrowing from them to buy their goods or whether you believe the proponents that say this will boost own economy in magical ways the fact of the matter is a deal has been reached – so what is it? Essentially, it’s a removal of the 10% tax bracket for everyone with some modifications. It includes phaseouts that begin past annual incomes of $75,000 and a component that includes those working Americans that don’t earn enough to pay income taxes.

To get a clearer understanding of the rules, let’s walk up the income levels and explain how it works; beginning first with those filing their taxes as singles and then adding in families. How the phaseouts work, from what I can understand, is that you first determine eligibility (if you earned more than $3,000 and paid taxes) and then, if you fall in to the phaseout, start reducing your benefit.

Singles

Determine Eligibility:
If you earned less than $3,000 – unfortunately you’d get nothing.
If you earned more than $3,000 but paid no taxes, you’d get $300.
If you earned more than $3,000 and paid taxes, you get $600.
If you have children, add $300 per.
Determine Phaseout Reduction:
The phaseout levels begin at $75k and end at $87k, at a reduction of 5% per $1,000 over the lower limit. If you earn above $87k, you’re over and thus get nothing regardless of the math.

Couples

Determine Eligibility (appears to be the same as singles):
If you earned less than $3,000 – unfortunately you’d get nothing.
If you earned more than $3,000 but paid no taxes, you’d get $600.
If you earned more than $3,000 and paid taxes, you get $1,200.
If you have children, add $300 per.
Determine Phaseout Reduction:
The phaseout levels begin at $150k and end at $174, at a reduction of 5% per $1,000 over the lower limit. If you earned above $174k, you’re over and thus get nothing regardless of the math.

Some Common Examples

These are taken from a post by Gridking on Tickerform.org:

  • An individual with $2,500 in earned income in 2007: Disqualified because income fell below the $3,000 threshold. No rebate.
  • A married couple with no children, with adjusted gross income of $100,000 in 2007: Would qualify for the full $1,200 couples. A $1,200 rebate.
  • A worker with one child, who earned $9,000 and owed no taxes in 2007: Would qualify for the $300 rebate available to individuals who pay no taxes but earned at least $3,000, plus an additional $300 for the child. A $600 rebate.
  • A couple with income of $145,000 in 2007, with three children: Would qualify for the full $1,200 for couples, plus $300 for each child. A $2,100 rebate.
  • A couple with income of $160,000 in 2007 with two children: Would qualify for a partial rebate, reduced by 5 percent for every $1,000 in income above the $150,000 threshold. An $1,800 rebate $1,200 for the couple plus $300 per child — would go down by 50 percent for this family. A $900 rebate.
  • A couple with income of $200,000 and four children: Disqualified because their income exceeded $174,000, the phase-out limit. No rebate.

There were a few other salient details to the bill, including a temporary raising of the individual mortgage ceiling that Fannie Mae and Freddie Mac could purchase (FHA loan limits) – increasing it to a whopping $729,750 (up from $417,000), and business tax breaks for infrastructure investments.

Some Questions & Answers

Here are the answers to many of the questions in the comments below, I wanted to wait until the Senate and House agreed on something before trying to tackle these:

Is this a rebate? What is it a rebate on?

The funds are NOT a rebate on the taxes you will pay next year, they are based on your 2007 tax return. Next year, after you file your taxes, the IRS will calculate what you should’ve gotten and adjust your return. So if you received too much “rebate,” they let you keep it. If you received too little, they decrease what you owe next year. (Correction made, Thanks Phil!)

How do I know what I get?

What you receive in May (or June or July) will be based on the tax return that is due April 15th. It will then be adjusted next year if necessary. So, it is based on your 2007 return, use the math I outlined above or the calculator below to determine what you’ll be getting.

Tax Rebate Calculator

This is a calculator that you can find on Consumerism Commentary and has been vetted by tax professionals, this is NOT tax advice so please consult a professional if you have additional questions:

(Photo: Tracy O)

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734 Responses to “2008 Tax Rebate Stimulus Package Explained”

  1. cc says:

    and how do i know this? because I just got off the phone with the IRS myself- and i won’t get anything because i still have money owed to them-however i will have to claim it as income on next years return-even though i won’t get it

  2. rheba says:

    I heard that we will have to pay taxes on the Stimulus rebate. Is that true. What about the people with large families who will get at least $3000 how can they pay taxes on that amount.

  3. Mattie says:

    I think the stimulus payment is a “pretty good idea”, especially for us Poor people who make less than 50k a year. We work just as hard and try to support ourselves just like the folks who make 150k yearly. It just might be a case of living in an area where the businesses are leaving the area or sending the jobs overseas and being done for a lot less wages. That’s the trouble with the U. S. of A. right now. People can’t feed and cloth a household of two people, let alone buy gas for your car on the minimum wage today. Just try to pay all the small things such as your utilities only on $6.50 per hour. Most all the comments I read made a good point for their situation, but most of us that need the stimulus payment feel like we just got a break. It won”t make a big dent in our situation but it will sure make me feel better. I sort of feel like I’ve had to pay more than my fare share over the past 37 years. Middle class Tax payers get hit pretty hard on their paycheck every other week. We just keep on plugging’. Ooh, in case you are wondering, NO, we DO NOT lay on the couch and live on drugs, nor have we ever received any government assistance—ever. As a matter of fact I am a Cancer Survivor and made it back to work within the same year that I had 7 surgery’s and 4 months of KEMO thearpy.
    Maybe I’ll just go out and buy myself a really expensive Hat!!!!!!!!!!!!!

  4. Mattie says:

    SOMEONE – ANYONE, Please tell me, is this a Stimulus Payment or Some kind of Rebate that we have to add as income on the 2008 Tax Returns??????

  5. Mattie says:

    I LIKE GOTCHA2000′s ANSWER. I HOPE HIS WIFE/CPA IS CORRECT!!!!!!

  6. mary says:

    my understanding is that my college children who work part time and make over 3000 will not get the rebate, because we claim them as dependents, and we wont get the 300 per child because they are older than 17. so no double dip or rebate for college students who can be claimed as dependents, but not child, on their parents income tax return. this is not fair to them. college students could benefit from the rebate and should get it if they work.

  7. Anonymous says:

    what if you and your spouse is seperated and you filed single and head of your household, and you have 2 childrensat home, one 16, 15, and a boy in college age 19, and you claimed him on your taxes for 2007.

  8. shirley jones says:

    what if you and your spouse is seperated, and you file seperated and head of household. And you hsve two childrens at home 15, 16, at home. And a son in college who is 21 years old, and you filed him on your year 2007 taxes. How much do i expect.

  9. brenda cowan says:

    MY ONLY SOURSE OF INCOME IS SOC. SEC. I HJAVE TWO SPECIAL NEEDS CHIRLDREN RECIEVING DEATH BENEFITS FROM FATHER & IM DISABLED HOW DO I CLAIM THIS REBATE OF DO I NOT QUILFY? WHAT FORM DO I NEED?

  10. Donate To Annimals says:

    There is entirely too much greed and gelousy being shown by all of you ignorant people who don’t know how to accept a gift from our great American Government! I therefore suggest that you immediately donate your “Economic Stimulas Package Gift” to your local S.P.C.A. upon receipt. You see, the animals won’t complain about why the dog got more than the cat etc. Lets’ have a little more respect for our Internal Revenue Service…

  11. Priscilla says:

    How will this rebate affect those elderly folks that receive SSN and Medicare/Medicaid if they file a tax return this year? Will they be penalized next year forward, will their benefits then be subject to review and possible elimanation or decrease of these already established benefits (due to retirement, disability, etc)???

  12. jennifer says:

    HOW MUCH WILL I GET BACK IF I CLAIMED ONE CHILD. HEAD OF HOUSEHOLD AND MADE $10191.00.

  13. SENAD KARABEGOVIC says:

    I NO SEE PAPER,FOR MY REBATE
    I HAVE REBATE OR NO

    THANKS YOU

    Senad Karabegovic

  14. becks says:

    My question may have been asked and answered already. If this is the case I apologize.
    background to question: I meet all requirements for receiving the stimulus finical boost. However, I am finishing my taxes online right now and I have gotten a response saying that I do not get anything because I filed under the status of “married filing separate”
    I don’t understand. I am waiting for my ex husband to sign the MDA so that our divorce can be completed civilly. Hopefully it will be over by the end of April.
    We were technically married in 2007, but I can prove “legal separation” for over 6 months.
    My question is: Is there away around this “married filing separately” problem for those who are in the process of divorce?

  15. Mr Man says:

    Last year my wife and I were expecting a refund of over $1100 but the feds kept it to pay towards my wife’s student loan that she owes. The $1100 towards the loan went mostly towards interest (go figure). Is the big eye in the sky going to take our rebate this year and put it towards the student loan? Hope not, I can use the $1200 rebate to off-set the huge amount I pay for gasoline to commute to and from work. I have a feeling the only thing that is going to get stimulated from this rebate package is big business’s already bulging fat wallets. Hmmm, more gas will get used while everyone is driving around spending there temporary pacifying payment. Most homeowners are probably going to pay mortgage, so there goes a lump sum of the rebates right into the banks vaults. Then there is the ever-present car payment (paying the bank once again). Let’s not forget insurance (legal rip off). I like to think the wool is not being pulled over my eyes. I just stand here and watch as the little money I have gets siphoned off by the big grasping greedy hand that is in most American’s pockets. Well, look at the bright side. Bunches of people are getting money that they otherwise wouldn’t have. I like the darker side better. It makes me feel good to complain. Life is great though, as a spoiled American. I can honestly say that I would much rather be in the situation I’m in now than those that are starving in war torn countries. Darn it, I wrote too long of a message now no one is going to read it!

  16. Mr Man says:

    RE:

    bryan responds:
    Posted: March 19th, 2008 at 9:58 pm

    Just another example of socialist, income redistribution. I guess because I’m successful and earn over $400K in annual income, I just get a thank you and more of my money goes to people with no fiscal responsibility and 18 kids.

    Hey Bryan,

    Just another example of arrogant rich folk that think their fecal matter doesn’t stink. The tax rebate is going to hard working people that haven’t been as successful as you “claim to be”. while you’re driving your Ferrari around town for no reason other than showing off, low and middle class parents are buying groceries for their children that may one day be more successful than you. You had to start off some where right, or where you successful at birth with a rich mummy and daddy that hired a nanny to wipe your snot nose.

  17. Mary Lambert says:

    This whole forum reminds me of when my grandmother decided to distribute some of her assets before she died. Everyone that received money and goods complained about what the other received instead of them. Before long no one was speaking to one another. Granny said “My previously very close family has eroded relationships amongst one another just because they were given something they didn’t have before” Grandma has since passed away. Upon the reading of her final will, all of those same relatives were dismayed to see that the remainder of her assets were left to charity. They were really shocked when they found out that those assets included bank Certificates of Deposits worth over $500,000.

  18. SAVANNH says:

    DO YOU GET THE REBATE IF YOU DO NOT HAVE A INCOME OF 3000. I WORK I FILED A 2007 TAX RETURN BUT I DO NOT THINK I MAKE OVER 3000 A MONTH. IS THAT 3000 A MONTH OR 3000 A YEAR. I THINK THE REBATE SHOULD BE FOR THE PEOPLE WHO DO NOT HAVE ALOT OF MONEY WHO ALSO PAY TAXES AND NOT JUST FOR THE PEOPLE WHO HAVE MONEY AND PAY TAXES THAT IS NOT FAIR WE ARE ALL TAX PAYERS.

  19. vincent williams says:

    about what time should i receive my rebate check and is there a way to determine by using my SS number. I also was wondering if I was going to receive a letter that was sent out last week to some people i didn’t receive it.

  20. Knowledgeable says:

    This message is for SAVANNH posted on 3/28/08 The answer to your question is no, you don’t have to make $3000 a month, or even $3000 a year. You have to make $3000 a week. I hope this new information will be helpful to you.

  21. Tina says:

    I didn’t receive a letter like everyone else I know did. Does that mean I’m not getting anything?

  22. watasi says:

    my problem is the same as vincent’s and tina above: i have not received a notice about my rebate either1 can someone please help us out on this matter? thanks.

  23. Anonymous says:

    Congress needs to make the stimulous package fair for everyone. Its not fair that they go by your adjusted gross income. Do they not realize that you have health insurance deductions, taxes taken out, etc out of your paycheck. Everyone should be treated equally.

  24. n lightfoot says:

    If I receive my social security in another country other than the U.S.A.and pay tax in the country in which it is received do I declare this tax on my 2007 tax return? or is it not taken into account because it is paid outside the U.S.A.?

  25. Anonymous says:

    It’s a shame that people making so much money will get more money while people on Social Security and single will get so little. The stimulus money should be distributed to those who have poverty level incomes.


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