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ReShelle L. Barrett, CFP®
ReShelle can be reached by or by calling the Pittsburgh office at
412-630-6000.
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What the Economic Stimulus Act of 2008 Means to You
As you likely have heard, Congress has recently passed a bill that will send as much as $600 per person or $1,200 per married couple to low and middle income individuals this year. In addition, they may receive $300 per qualifying child.
So the questions on most individual’s minds are how much they will get and when they will get it. Let’s start with how the rebate is calculated. According to a CCH Tax Briefing the amounts are calculated as the greater of:
Net income tax liablility, not to exceed $600 ($1,200 for joint filers), or
$300 ($600 for joint filers) if the individual has either:
a. At least $3,000 of any combination of earned income, Social Security benefits and certain veteran’s benefits (including survivors of disabled veterans), or
b. Net income tax liability of at least $1 and gross income greater than the sum of the applicable basic standard deduction amount and personal exemption(s) ($8,950 for singles, $17,900 for joint filers).
In addition to the basic rebate, the new law provides an additional $300 per qualifying child.
However, not everyone is eligible for the rebate. Higher income taxpayers are phased out of eligibility based on adjusted gross income (AGI). Individuals with $75,000 of AGI and couples filing jointly with $150,000 AGI begin to lose their rebate. These taxpayers are completely phased out for income levels of $87,000 for single and $174,000 for married filing joint couples based on their 2007 Federal Income Tax Return.
As for when the checks are being issued – the IRS is prepared to manage the tax filing season and simultaneously issue the rebate checks starting in early May. According to Treasury Secretary Henry Paulson, there is confidence the payments would largely be made by “this summer.”
The eligibility of the taxpayer, the amount of the rebate and the status of qualifying children are all based on the 2007 tax year. Therefore, you must file your return before qualifying for the rebate. If you file an extension, your rebate will not be issued until after you file your federal return. All qualifying rebate checks will be mailed by December 31st, 2008 as long as your tax return has been filed.
There was no shortfall of confusion the last time the government issued stimulus rebate checks in 2001. They were rumored to be a return of your own money such as when you get your income tax refund. However, you can rest assured knowing this is not an early refund of your own tax return. It is simply a rebate that puts dollars in your pocket immediately that you otherwise would not have received. So file your return and spend your rebate wisely!
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