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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. haden says:

    bryan is a complete moron. without poor, there would be no rich…including you, douche bag. go back to school and learn a basic lesson in how capital is accrued. you get paid a lot because a lot of people get paid a little… and it’s not because you work forty times harder than they do.

  2. cheryl says:

    How can u determine how long it could take for the check to get to you? up to what 4-6 weeks or 8?

  3. Anonymous says:

    Ok.. I am completely confused about this stupid stimulus package deal. Ok, my husband and I had only a $15,000 AGI on 2007 Tax return combined (we filed jointly). We pretty much got back 90% of the federal taxes that we paid last year. Now, when I do the “calculator” it says that our estimate amount will be only $600. It just doesn’t make sense to me. Shouldn’t we get $1200? We made more than $3.000 and paid taxes! I’m so confused, will someone please explain it to me! The more I read info about it, the more I get lost!!

  4. Anonymous says:

    What if your 17, able to (and did) file taxes, but your parents were able to claim you as a dependent?

  5. Dianne says:

    will i get refund even if got eic

  6. Zach says:

    I’m 19 and my mom has claimed me but I made 4,800? do I get 300 or 600 or anything?

  7. Amber says:

    i am a single parent claiming head of household. i meet the income requirements from full time employment all year. so my question is…. i made less then $20,000 this year and i had taxes taken OUT of my paychecks but did not have to PAY IN to the IRS this year. i got everything back incuding EIC. so will i be getting $300 + $300 for my child? or $600 + $300 for my child?

  8. trulyconfused says:

    i would like to know if this stimulus check can be taken due to any obligations such as past child support or student loans. I cant find an answer anywhere.

  9. Kevin says:

    If you aren’t paying your child support, do you really think you deserve this check?

  10. Anonymous says:

    Can anyone explain what this person below has asked? I also am confused. My husband and I fall into the same category. Our AGI was $10,433.00, and according to the calculator above, we only get $600, not $1200 as it says above the calculator. We paid taxes on my husbands income, but mine was SS disability, so I paid no taxes. Someone please explain. We could really use the extra $600!

    ________________________________________________________________
    Posted: April 16th, 2008 at 2:48 pm

    “Ok.. I am completely confused about this stupid stimulus package deal. Ok, my husband and I had only a $15,000 AGI on 2007 Tax return combined (we filed jointly). We pretty much got back 90% of the federal taxes that we paid last year. Now, when I do the “calculator” it says that our estimate amount will be only $600. It just doesn’t make sense to me. Shouldn’t we get $1200? We made more than $3.000 and paid taxes! I’m so confused, will someone please explain it to me! The more I read info about it, the more I get lost!!”

  11. MISTIEKL says:

    There were two questions asked previously but I could never find the answer to them,would someone please tell me the answer to these two questions,,

    If you have back child support and IRS intercepts your refund,,,will they also intercept this stimulus check?

    If you claim head of household and claim an ederly parent as a deduction,,do you get stimulus check for your elderly parent you claimed as a deduction?

  12. katydid says:

    All of these questions seemed to be answered on http://www.irs.gov. They have a few pages of information, all of which seemed pretty clear to me. Briefly, however, here are a few answers:

    1. The child portion of the rebate refers only to children for whom you took a child tax credit on your 2007 taxes. It does not apply because you have other dependents; those dependents do not qualify for the child portion (max of $300 per child) of this rebate.

    2. If the IRS intercepts your refund because you owe back child support, then it will, in all probability, intercept your rebate check.

    3. You can’t get a rebate check unless and until you file your 2007 tax form. If you chose “direct deposit” for your refund (assuming you got a refund), you will get your rebate directly deposited into your bank account before the paper rebate checks get mailed out to the rest of the qualifying people. By “rest,” I mean people who qualify for the rebate but instead of receiving a refund for tax year 2007, they paid in and therefore couldn’t have chosen “direct deposit,” and those people who still paper file with the IRS.

    4. The cut-off for qualifying children is 17, just like the child tax credit.

    All this information is available on the IRS site. Actually, more than this is available. It explains in DETAIL about the calculations, cut-offs, and various scenarios that apply.

    Good luck. : )

  13. Awesome Sauce says:

    Anything that penalizes single mothers is a good thing!

    In addition, I’m amazed at the genuinely low incomes being posted in this thread. Didn’t any of you go to college?

  14. Awesome Sauce says:

    I redact that last statement, since how on earth are you going to get a quality education and income if you are just pumping out kids without a spouse to help.

    The incomes match the intelligence level of the questions being asked, my bad! Didn’t see the relationship at first.

  15. Awesome Sauce says:

    Oh yes one more thing. I make six figures and plan on buying some choice weed with my rebate.

    Having an education and planning your family rocks. 80% of this thread should try it sometime.

  16. blue paperclip says:

    Below I will respond to several questions asked just to clear some things up.

    In response to Anonymous on April 23rd:

    The amount of your rebate depends on how much your tax liability is. You will get a rebate between $600 (which is the base for a married couple) and $1200 (excluding the $300 per child under age 17 that you claimed on your 2007 taxes). Since you had such a low income level, you probably did not have any tax liability. But your income was above $3000 so you will get the base rebate check.

    As far as single vs married rebate checks go: A single person who has at least $3000 of income (including retirement and investment income) but had no tax liability will receive $300. The rebate check amount will go up based on how much tax liability you had, up to $600. A married couple with income above $3000 but had no tax liability will receive a minimum of $600. The rebate check will go up depending on your tax liability, up to $1200.

    The rebate checks for a married couple will still be between $600 and $1200, even if only one of the earned income.

    If you are claimed on someone else’s tax return (ie: a college student being claimed by his parents), you will not receive a rebate check, regardless of your income level. Parents claiming their children will get $300 per child, but only if the child qualified for the child tax credit (meaning they have a valid social security number and are under the age of 17 by the end of 2007).

    People on SSI (Supplemental Security Income) do not qualify for the tax rebate but will qualify for the $300 per child.

    In order to qualify for the rebate at all, you must have a valid social security number.

    The rebate is based on your 2007 tax return. In order to get your rebate check in the first wave of “mailouts,” your tax return must have been filed and processed by April 15th. If you filed close to the deadline or if you filed an extension, it doesn’t mean you lose the rebate; it just will be delayed. When it will be mailed to you (or deposited into your account) depends on when you file your tax return. But you must file by October 15 (the extension deadline) as the IRS will not be mailing any rebate checks out past the end of 2008. When you file your 2008 tax return, the rebate will not be taxable nor will it reduce your tax refund or increase the amount of tax you pay.

    If you chose direct deposit on your tax return (as in you got a refund and had it deposited rather than receiving a paper check), the IRS will try to deposit your refund into the same account. If the account is closed or the deposit is rejected, then the IRS will mail you a check to the address listed on your tax return. If you changed addresses since you filed your tax return, then you must have your mail forwarded or the IRS won’t be able to mail you a check.

    I think this pretty much covers the general questions asked. Hope this helps clear some things up.

  17. Jon says:

    Wow. So basically dependent students are left out completely. I guess the govt. figures that we just get everything handed to us anyway? Seems like they have no clue about the real world AGAIN. If your claimed by your parents, but your over 17 then you’re just out of luck. Oh well… there goes paying off my CC bill. Hope that somebody else gets rid of some debt with it.

  18. Anonymous says:

    Leo – you are a moron.

    I came to this site for info on “head of household” and was shocked by some of the comments. For the recored, there are PLENTY of single mothers who WORK FULL TIME and DO NOT collect a penny of child support. I am one of those – and if not for two months unpaid maternity leave I would be over the single threshold and wouldn’t get a dime. But as head of household I am responsible – by MYSELF – for all living and childcare expenses. While I do not have another adult in the house to feed, I also don’t have that adult’s earnings. So yes, in my book, heads of household without additional sources of income should be treated differently than singles (maybe btwn single and married?) And while this isn’t the forum, anyone who bashes “single parents” as a whole is ignorant and misguided. Maybe that rath should be directed at the parent who left, rather than the one who stayed, and is – in most cases – doing their best to provide a loving and safe environment for their children.

  19. Anonymous says:

    I want to know if you owe back taxes on another year and are making monthly payments on it, will the IRS take this check and apply it to my owed taxes or will i actually recieve this?

  20. grit says:

    to Awesome Sauce- grow up.

  21. smh says:

    We filed bankruptcy last August, Chapter 13 due to a disability and no income for 4 months after disability decided not to continue paying my claim. Under our agreement wit the Court, all income tax returns are to go to the trustee account to pay towards the bankruptcy. We received the federal return and immediately sent it to the trustee. I’m not sure about the rebate as it is not an advance against next years returns, so my question is, can we keep the rebate check? Our attorney’s office has not been told yet and they have inquired about it. Do you have an answer? Thanks!

    smh

  22. Kathy R. says:

    My husband & I recently ( 3-27-08) had to file chapter 13 bankruptcy. When our bankruptcy was written up the $527 that we owe to the IRS from 2007 taxes being filed, was listed as a priority debt to be paid and was included in our chapter 13. Our atty. did mention that we should get the $1200 stimulas check when I ask him. My concerns are: since we did not get a return, but instead owed this year, our banking info was not listed on our tax records, so we figured that it would just be in the form of a paper check. BUT…since we are suppose to be paying this $527 that we owe to IRS thru the bankruptcy and we assume that the court HAS notified IRS of this, we are wondering if now,1. we will get the rebate check for the total amount of $1200 and 2. since we do owe the money will IRS hold it out of the rebate, then send remainder even though it is included in bankruptcy? and 3. we also are concerned WHEN we can expect to get it and 4. will we end up paying the $527 twice, once b/c they deduct it from rebate and we pay it thru the chapter 13 also?? Many questions we do not have answers to and have an atty. that we can’t seem to get straight answers from. We have been very disappointed with the service and feel like we are in the dark… I would appreciate any comments that might help with this. Thanks

  23. john p says:

    i heard that only home owners qualify for the stimulus check is that true?

  24. jan says:

    According to the IRS website this will not affect your 2008 return. It will not increase the amount you owe or decrease your refund in 2008. It will also not be taxable. Here is a link to the IRS page.
    http://www.irs.gov/newsroom/article/0,,id=179181,00.html

    These questions are answered toward the bottom of the page.

  25. watasi says:

    to blue paperclip: thanks a lot for the info you posted. i’m sure you helped a lot of folks out. but my question wasn’t answered: i did not receive a notice in the mail telling me i was going to get a rebate! i filed corrrectly on a 1040a back in january. am drawing social securty,above the 3000 dollar limit. i even took it to a tax consultant to verify i did everything right. i understand not all taxpayers are going to get a notice. am i one of them? i guess time will tell…


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