| Congress recently passed the Economic Stimulus Act | | | | Rebate Amount. |
| of 2008. It's designed to inject $152 billion into the U.S | | | | Here are a few examples. |
| economy. What does this mean to you? | | | | Example 1: |
| You could be one of the 130 million taxpayers who will | | | | A married couple with no qualifying children and 2007 |
| receive a rebate check this year. | | | | AGI of $175,000: |
| If you own a business, your business can take | | | | Step 1: Maximum possible rebate amount is $1,200 |
| advantage of two tax breaks: Increased Section 179 | | | | Step 2: AGI is $175,000 |
| Amounts and Bonus Depreciation. For more | | | | Step 3: AGI is greater than $150,000 so continue to |
| information relating this this topic, please see my recent | | | | Step 4. |
| article: "How the New Tax Law Can Help Your | | | | Step 4: Excess AGI is $25,000 ($175,000 - $150,000) |
| Business: Two Tax Breaks for Businesses. | | | | Step 5: Rebate Reduction is $1,250 ($25,000 Excess |
| If you own or invest in real estate, you may find some | | | | AGI x 5%) |
| relief with your "jumbo" loans. | | | | Step 6: Rebate Reduction amount ($1,250 from Step |
| ARE YOU GETTING A REBATE CHECK? | | | | 5) is greater than Maximum Possible Rebate amount |
| There are two groups eligible to receive rebates. You | | | | ($1,200 from Step 1) so the rebate amount is $0. |
| can only be in one group so if you qualify for both, be | | | | Example 2: |
| sure to pick the group that results in the higher rebate | | | | A married couple with 1 qualifying child and 2007 AGI |
| amount. | | | | of $175,000: |
| Group 1: Those who paid taxes in 2007. | | | | Step 1: Maximum possible rebate amount is $1,500 |
| Group 2: Seniors, disabled veterans and widows of | | | | ($1,200 basic rebate amount + $300 for 1 child) |
| veterans. | | | | Step 2: AGI is $175,000 |
| Those specifically excluded from the rebate pool | | | | Step 3: AGI is greater than $150,000 so continue to |
| include nonresident aliens, estates, trusts and | | | | Step 4. |
| dependents (dependents only have to qualify as a | | | | Step 4: Excess AGI is $25,000 ($175,000 - $150,000) |
| dependent and need not be claimed as a dependent in | | | | Step 5: Rebate Reduction is $1,250 ($25,000 Excess |
| order to be ineligible). | | | | AGI x 5%) |
| WHAT IS THE MAXIMUM POSSIBLE AMOUNT OF | | | | Step 6: Rebate Reduction amount ($1,250 from Step |
| YOUR REBATE IF YOU ARE IN GROUP 1? | | | | 5) is NOT greater than Maximum Possible Rebate |
| Keep in mind that these are the maximum possible | | | | amount ($1,500 from Step 1) so the rebate amount is |
| rebate amounts and may not necessary be the | | | | $250. ($1,500 - $1,250). |
| amount you ultimately receive due to limits and | | | | WHAT'S THE MAXIMUM AMOUNT OF YOUR |
| phase-outs. | | | | REBATE IF YOU ARE IN GROUP 2? |
| If you paid taxes in 2007, the maximum amount of | | | | For seniors, disabled veterans and widows of |
| your rebate is: | | | | veterans, the maximum amount of the rebate is $300 |
| $600 for individual filers | | | | for individual filers and $600 for married couples filing |
| $1,200 for joint filers | | | | jointly. |
| Plus, add an additional $300 per qualifying child to your | | | | To qualify for the rebate in Group 2, the individual must |
| maximum possible rebate amount. There is no limit on | | | | have either: |
| the number of qualifying children! | | | | At least $3,000 of any combination of earned income, |
| Example: If you are a joint filer with two qualifying | | | | Social Security benefits and certain veterans' benefits |
| children, your maximum rebate amount is $1,800 ($1,200 | | | | (including survivors of disabled veterans), or |
| basic rebate + $600 for two qualifying children). | | | | Net income tax liability of at least $1 and gross income |
| WHO IS A QUALIFYING CHILD? | | | | greater than the sum of the applicable basic standard |
| If you're familiar with the child tax credit definition, that | | | | deduction amount and one (two if a joint return) |
| same definition applies here. There are several | | | | personal exemption ($8,950 for singles, $17,900 for joint |
| requirements: | | | | filers). |
| - A qualifying child must not have attained the age of | | | | Unlike Group 1, Group 2 doesn't have any phase out or |
| 17 as of the close of the calendar year. | | | | additional limits. As long as the taxpayer meets one of |
| - The qualifying child must be the taxpayer's qualifying | | | | the two requirements above, the maximum rebate will |
| child for purposes of the dependency exemption. | | | | be issued. |
| - The qualifying child must be a son, daughter, stepson, | | | | HOW CAN YOU CLAIM YOUR REBATE? |
| stepdaughter, or descendant of such child, or a brother, | | | | If you file a 2007 income tax return (that's the tax |
| sister, stepbrother, stepsister or a descendant of such | | | | return due April 15, 2008), the IRS will calculate the |
| relative. | | | | rebate amount for you and will send it by mail or direct |
| Don't forget, your maximum possible rebate amount | | | | deposit without your having to take any further action. |
| may be reduced due to limits and phase-outs. Read on | | | | If you don't file a 2007 tax return but still qualify for a |
| to find out if your rebate amount is impacted. | | | | rebate because of your earned income level, combat |
| WILL YOUR REBATE BE LESS THAN THE | | | | pay, or receipt of Social Security benefits, the IRS has |
| MAXIMUM POSSIBLE AMOUNT? | | | | promised to announce how you will get on the rebate |
| If you're in Group 1, your rebate amount may be less | | | | list. |
| than the maximum possible amount due to limits and | | | | WHAT IF YOU EXTEND YOUR 2007 TAX |
| phase-outs. | | | | RETURN? |
| First, the amount of your rebate is limited to your 2007 | | | | Because the rebates are based on your 2007 return, if |
| tax liability. This means if your maximum possible | | | | you file your return after April 15, 2008, your rebate will |
| amount is $600 and your 2007 tax liability is $575, then | | | | be delayed. For example, individuals on extension this |
| $575 is the maximum rebate your can receive. | | | | year who do not file their 2007 return until the |
| Second, the rebate amount phases-out based on | | | | extended October 15, 2008 deadline will not receive |
| income levels. | | | | their checks until year-end. No checks will be sent after |
| The rebates start to phase-out when: | | | | December 31, 2008. |
| - A single person's 2007 adjusted gross income is | | | | Read about the benefits of extending your tax return. |
| greater than $75,000 | | | | After 2008, those who missed out on the rebate or |
| - A married filing joint couple's 2007 adjusted gross | | | | received only a partial rebate get a second shot at |
| income is greater than $150,000 | | | | qualifying with 2008 data when they file their 2008 |
| If you're over these limits, then your rebate amount is | | | | return in 2009. This group includes those who did not |
| reduced by 5% of the amount exceeding the adjusted | | | | receive a full $600/$1,200 check either because their |
| gross income threshold. | | | | 2007 income was either too low or too high, or they |
| WHAT DOES THIS PHASE-OUT REALLY MEAN? | | | | did not receive a full $300 child credit because their |
| Here is a formula you can use to determine your | | | | income was too high or a child was born or adopted in |
| rebate amount: | | | | 2008. They get another chance to claim the difference |
| Step 1: Determine your Maximum Possible Rebate | | | | based on their 2008 tax return filed in 2009. If a |
| amount | | | | taxpayer would have received a smaller rebate check |
| Step 2: Determine your 2007 adjusted gross income | | | | if based on 2008 return information rather than his or |
| (AGI) (You can find this on your 2007 tax return). | | | | her 2007 return, however, the taxpayer is not required |
| Step 3: Is your 2007 AGI greater than $75,000? | | | | to give back the difference. |
| ($150,000 if joint filer) | | | | WHEN WILL YOU RECEIVE YOUR REBATE? |
| If you answered no, you're done! You'lll receive the | | | | Congress has directed the IRS to issue rebate checks |
| maximum possible rebate amount. If you answered | | | | "as rapidly as possible." No specific date has been |
| yes, continue to Step 4 | | | | released yet, but it's likely that the process will start in |
| Step 4: Calculate your "Excess AGI." Your 2007 AGI - | | | | May. The government is also likely to utilize direct |
| $75,000 ($150,000 if joint filer) = Excess AGI | | | | deposit as much as possible rather than issuing paper |
| Step 5: Calculate your "Rebate Reduction." Excess | | | | checks. Overall, the government will have to issue or |
| AGI x 5% = Rebate Reduction | | | | deposit more than 130 million checks, so the rebate |
| Step 6: Is your Rebate Reduction amount greater than | | | | process will take some time. When we learn how the |
| your Maximum Possible Rebate amount (from Step | | | | government intends to issue the checks, we'll let you |
| 1)? | | | | know. Also, if you owe any federal debts or unpaid |
| If you answered yes, then your rebate amount is $0. If | | | | child support, the government will apply your rebate to |
| you answered no, then your rebate amount is: | | | | that debt. |
| Maximum Possible Rebate - Rebate Reduction = Your | | | | |