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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. Dorothea Thompson says:

    Regarding how the tax stimulus package is calculated:

    Why is the amount of Tax Liability from box 10 on 1040EZ used instead of Federal Tax Withheld in box 7 on 1040EZ?
    It seems people with more money get more from the stimulus package than those making far less, so who is it really helping?
    Those who severely need it, make very little, and could Really use it don’t really benefit from this package.
    $600.00 may not seem like a lot to those who use 1040 or 1040A but to those who use EZ it may mean their bills get paid on time, or their cars get repaired without having to shortchange the rent, or school clothes and supplies, or field trips, or children’s birthday’s, or more food in the house, or doctors visits etc…

    Thanks

  2. Troy says:

    If I just got notice that |I owe the IRS money, will I still get my
    rebate check.

  3. Louie says:

    This answer is to Troy-who wrote early this morning; Troy my friend, I hate to ruin your day, but you’re screwed. And I don’t mean by a pretty blond either! Maybe next time you won’t try to beat the government. Just pay your fair share of taxes like everybody else you (MORE-ON)…

  4. Anonymous says:

    thank you very much now when do i get my 40 acres and a mule?

  5. joyce says:

    i thought that all tax rebate checks would be mailed out the first week of may

  6. mandie says:

    I have 4 children I take care of and couldn’t find work. I worked bartending and working at a retail store. I take care of my children, I pay taxes on everything I buy, I pay my dmv taxes, I pay on my phone bill, garbage bill, and any other service I used throughout the year. I do not qualify for this tax rebate. I would use it to buy my children the things they need. I can’t even afford to get to work barely with the gas prices. People that are this poor, would spend the check on the things in the stores to boost the economy. The people who make a lot of money, and don’t need it, will probably invest it or something stupid like that, and try to make more money off of it or puting it in the bank and letting it sit there. It doesn’t matter how much you paid in or not. The more money you make, the more money you owe at the end of the year. Just cause you make more money doesn’t mean you work harder. It makes me sick the way people think. They think poor people sit on the couch all day and smoke pot. That is trash talk. It is stereo typical. Live a day in my house, not be able to buy stuff for your kids live in a house where the yard is small and the paint is peeling off the walls and there is mold on the ceiling. The economy and inflation are attacking the poor. The hybrid is available for people who can afford a new car. Thats great for them. My first hour of work is dedicated to get there and back in my 1994 dodge spirit with bald tires. I work just as hard as the next person. My parents couldn’t afford to send me to college. I guess that makes me a pot smoking couch lounger. This country is filled with so many greedy people it makes me nautious. Keep your stupid tax money, I don’t care, I can handle being poor, I am used to it. I’d like to see most of you try it for a day. You’d cry like little babies.

  7. Bart says:

    THis message is for MANDY… who provided us wealthy people with some good bedtime fictional reading last night. Mandy dear,- how long have you been writing short stories? Did you know that “Readers Digest” is paying $100 for your kind of writing. Keep up the good work! I’m looking forward to seeing more of your fiction in print… Sincerely Yours, Bart

  8. Sappho says:

    If a couple is legally married and spouse A earns $90,000 and spouse B earns $0, the couple gets a $1,200 check from the government. If that same couple is not allowed to marry because they happen to be gay or lesbian, the couple gets nothing. How fair is that?

  9. deanna moody says:

    my question is me and my husband have always done direct deposit. This tax season is the first time in like 13, 14 years we didn’t. I read somewhere on the internet that if they have your infomation on file that you can still get the rebate check on direct deposit… I hate to have to wait till july. the last two of the social is 91. so we would get it in may through direct deposit… Right in time for our vacation on the 28th,.. i hope i can still get it direct deposit even though we didn’t do direct deposit on our tax’s this year. we have though all previous years. If anyone knows PLEASE let me know…

    thank you

  10. Trevor says:

    It seems that if you have been injured on the job, and were on Workman’s compensation during all off 2007, you will not be illegible for this stimulus package. But if you are to lazy to get a job, then belly up! The taxpayers are going to shell out more money to you! Those on welfare are illegible, those on workers compensation are not. And the worker get screwed again. I for one will vote against any senator who supported this unfair plan.

  11. tommy says:

    To Mandy and everyone else who hates the rich:

    If you’re struggling to make ends meet take a look around you and figure out what you’re paying for that you don’t need. Do you have a t.v.? Do you have a computer? a cell phone? Cable? All of these are things that you don’t need to live and cost money. If you are struggling as much as you claim then maybe you should let some of that stuff go. Guess what, my parents have not paid for my college but I am about to graduate. I worked during the summers, started my own businesses, saved my money, purchased what I could afford, applied for scholarships. I got enough to pay for school on my own, you could have too. Take some personal responsibility, investing isn’t stupid. It is actually very smart, it makes you more money.

    I don’t have money I am a poor college kid, but I do not think that it’s fair to have arbitrary figures to decide who gets what. All of you people saying “Poor people are the ones who build your house, clean your house, cook your food…etc.” Guess what, the people who hire you are the ones supporting your ass. So don’t have the attitude that they owe you something. I get real pissed when people complain about only making minimum wage and how it isn’t fair how CEO’s make much more. Or come up with some B.S. about being fortunate. Most people work their tail off to get where they are, the whole fortunate concept..B.S.

    This country penalizes those who are successful to me that is the atrocity here.

    To those who earned the right to be classified in the top 10% of earners…Thank you, you give me a model to aspire to.

    This is a link to a great speech. It has formed many of my ideals for which I am thankful to the man who wrote it.
    http://boortz.com/more/commencement.html

  12. sharon says:

    Do we get a rebate if we are retired but paid Federal Taxes in 2008?

    Do we get rebate if we collected SSI?

  13. Bethyl Joyce says:

    If my husband passed away in May of 2007 and the IRS let me file as married and jointly, will I still get the benefit for him also. Before he passed away, he was drawing SS Disabiltiy. I did work and fit in the allowable income bracket.

  14. Holly says:

    Can you explain to me what happens if you are a student (as in, in college and over 18) claimed by one of your parents because you are a student, but were working and paid taxes etc…do you benefit from this even though you were claimed by a parent?

  15. Jim Fehr says:

    Do you know where there is printed information about the benefits geared towards business? I hear there are some benefits for businesses to spend money on equipment in 2008 as part of this package, but I have not seen anything published about those incentives?

  16. mkaajaja@gamil.com says:

    Thanks BUsh for tha money…

  17. Lou Etta Johnson says:

    the question that I want to ask deals with the mother who have full custody of the child but agree to do tax every other year. He have he odd years and I have the even year. This year is a odd year and he claimed him on his tax return tis year. But he lives with me who suppose to clsim him for the stimilus packages?

  18. LadyNina says:

    First of all, I don’t buy my bag of weed until AFTER all the bills are paid out of my weekly pay check. And on Saturday and Sunday morning when some of you are watching Cartoon network with the kiddies, I’m going to my weekend job, after working 45 hours at the office. So if I want to sit on my couch for a few hours before the week starts all over again and smoke my dutch you shouldn’t have a problem with it.

    And if I wanted to use the rebate to buy an ounce there shouldn’t be an issue with that either. Rest assured that I wont be buying any big ticket item with the rest of it. That $900 will make a big dent in my credit card balance or give me a month free from my mortgage payment. Heck, I might just park it in my ING account to await the next household emergency.

    And for your information, I know quite a few people over the 75,000 to 150,000 threshold who will be sitting on their couch with their bag of purple haze too. No body turns their nose up at you when you spend $20-$40 at the liquor store/ bar to get your fix.

  19. Anonymous says:

    I receive a portion of 2 retirements from my ex-husband because of a divorce agreement. I pay state and federal taxes on these 2 retirements (on form 1099R). The amount is over $12,000. Can I expect a $600 or $300 check or will I get anything at all?

    TJA

  20. kathy says:

    What crap this whole thing is! How is $600.00 supposed to help and why do people with 6 figure incomes need the money? The government is, as always dilusional. They don’t know what it’s like to worry about gas prices, job loss, mortgage issues.

  21. Jaik says:

    Anyone remember last time there was an National election up for grabs to either party ( 2000 ) Gore promised to use the “tax surplus” to rescue social security. Bush jr promised to take that money and give everyone in the country $300, which of course we would only get if enough of us voted for him. Hey I’ll give you $300 if you vote for me. Now that it is an election year again where the current administration is highly unpopular, hey we’ll give you $600 ….

  22. jim doe says:

    You guys are all just a bunch of little piss ass whiners. If you have to rely so much on this little stimulus package and do i get this much or that much and when do i get you got bigger problems. Stop relying on hand outs and fend for yourself. maybe you’ll have to cut the trip to the bahamas this year and pay your mortgage off or something. Man you people make me sick.

  23. Dan says:

    Hey, Tommmy. Congrats on getting thru college on your own. Enjoy the loans.

    It’s certainly been a surprise that people of modest wealth like yourself so strongly advocate for the rich and their rights out of the self centered delusion that they, too, will one day be rich. Give yourself a few decades of busting your butt just to be middle class and hopefully retire one day and put your kids through college and see how you feel.

  24. tommy says:

    Hey Dan,
    It’s very telling how you come down on a young adult entering the real world and say I will only attain middle class. Even if thats all I achieve which isn’t a bad life I still will not think it’s good to take something from someone else who worked for it. Don’t come down on me Dan because your choices you made in life didn’t get you where you’d hoped to be.

    Let me put it to you this way Dan, let me educate you. Well educate is a stretch considering that you’d have to be unintelligent or just plain self centered to not see the logic in my argument.

    Let’s say Dan that you have a watch, a very nice watch. This watch is something you’ve worked long and hard to be able to afford. Now, out of your dutiful and diligent labor you’ve accumulated enough money to purchase this watch. Now you have it on and you’re walking around town with it and someone sees it and wants it. They tell you that you should give it to them because they could never afford it. Now you think to yourself “No way, I worked for this watch, it is mine.” You tell him “No, you can buy one yourself” Now this man tells you it isn’t his fault that he can’t afford a watch and that you are a greedy asshole for not giving it to him. Then he petitions the government and they agree with him. The legislation is passed and you are forced to give him the watch you worked so long and hard for. Does this seem fair to you Dan? No, of course not but it is the same thing with welfare, stimulus packages, and whatever government program that takes money from “People who have enough and don’t really need it” to give to the ones who “Just weren’t quite as lucky”
    Dan I hope that you can understand this analogy it seems pretty basic. But chances are you don’t get it, and will think that the two have nothing to do with one another.
    Adios Dan,
    Tommy

  25. tommy says:

    Oh one more thing Dan, I guess you didn’t catch it in my initial post. I do not have loans to pay back. See when I said I worked and applied for scholarships I meant that I have school paid off. So, I will not experience what paying back a school loan is like. I knew you’d want to know that and that you’d be happy for me so thanks in advance for the congratulations.


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