Economic Stimulus Act of 2008 - Tax Rebates

Tax Rebates

Tax rebates created by the law were paid to individual U.S. taxpayers during 2008. Most taxpayers below the income limit received a rebate of at least $300 per person ($600 for married couples filing jointly). Eligible taxpayers received, along with their individual payment, $300 per dependent child under the age of 17. The payment was equal to the payer's net income tax liability, but could not exceed $600 (for a single person) or $1200 (married couple filing jointly). Net liability can be found in these locations:

• Form 1040: line 57 plus line 52
• Form 1040A: line 35 plus line 32
• Form 1040EZ: line 10

Those with no net tax liability were still eligible to receive a rebate, provided they met minimum qualifying income of $3,000 per year. Rebates were phased out for taxpayers with adjusted gross incomes greater than $75,000 ($150,000 for couples filing jointly) in 2007. For taxpayers with incomes greater than $75,000, rebates were reduced at a rate of 5% of the income above this limit. Individuals who were claimed as dependents by another taxpayer were not eligible for the rebates.

The $3,000 of qualifying income includes earned income (e.g., wages, self-employment income, Social Security), however Supplemental Security Income does not count as qualifying income for the stimulus payment. Also, low-income workers are required to file a return to receive the payment, even if they would not be required to file for income tax purposes.

Some taxpayers who exceed the income limits, but have qualifying children, will still get a rebate. For example, a single parent whose 2007 adjusted gross income was $90,000, pays more than $600 in 2007 taxes and has two qualifying children will receive a rebate of $450. The IRS adds together a $600 rebate for the parent and $600 for the two children to get $1,200, then subtracts the phaseout reduction of $750 ($50 for each $1,000 income above $75,000) to get $450.

According to the IRS, the stimulus payment did not reduce taxpayers' 2008 refunds or increase the amount owed when filing 2008 returns.

The payment schedule is based on whether the taxpayer's 2007 tax return listed direct deposit information as well as the last two digits of the social security number of the tax return's main filer, with direct deposits being sent between May 2 and May 16, and paper checks being sent between May 16 and July 11. On April 25, 2008, President Bush announced that the rebates will start going out on April 28, 2008 and the paper checks will be sent out starting on March 28, earlier than previously announced by the IRS.

Taxpayers who used direct deposit for their refunds will receive the stimulus payment that same way, provided they have not done any of these things:

• Taken out a refund anticipation loan or "rapid refund";
• Used a service such as TurboTax and had the transmission fees taken out of the refund amount;
• Had their refund deposited across two accounts;
• Allowed their tax preparer (such as a CPA) to deduct their fee from the refund amount.

If any of these scenarios apply, the payment will be sent as a paper check through U.S. mail.