$300/600/1200+ rebates w/changes, PLEASE READ! - Ohio State Forums & Message Board Community

By Jeanne Sahadi, CNNMoney.com senior writer
February 8 2008: 5:33 PM

http://money.cnn.com/2008/02/08/pf/taxes/rebates_what_you_need_to_know/

The plan's centerpiece: tax rebates.

But questions remain about how the program will work, and officials at the Treasury Department and IRS are scurrying to work out the details.

In the meantime, here are some answers based on currently available government information and experts' analysis.

Do I qualify for a rebate and how much can I expect?

One-time rebates will be sent to at least 117 million low- and middle-income households, 20 million senior citizens living off of Social Security, and 250,000 disabled veterans.

To be eligible for a full rebate, single tax filers must have 2007 adjusted gross income (AGI) below $75,000 and joint filers must have AGI below $150,000.

Adjusted gross income is not your annual salary. It's equal to gross income minus "above the line deductions," which are reported on page 1 of the 1040 tax form. Above-the-line deductions include deductible IRA contributions, alimony paid and, for the self-employed, some portion of money spent on health insurance or Social Security.

Single filers with AGI below $75,000 will get rebates of as much as $600. Couples with AGI below $150,000 will receive rebates of up to $1,200.

In addition, parents will also receive $300 rebates per dependent child; there is no cap on the number of children eligible.

An example: A couple with one child and $100,000 in AGI will get a rebate of $1,500 ($1,200 + $300). If they have two children, they will get $1,800 ($1,200 + $600).

*Tax filers who do not owe income taxes because of various credits and deductions but have at least $3,000 in income - which can include Social Security and disability payments - will get $300 rebates per person or $600 per couple.

I make more than the income caps. What about me?

You might get a partial rebate. It depends on how much your income exceeds the caps.

The stimulus legislation allows for a 5% phaseout rate for households above the income caps of $75,000 for single filers and $150,000 for joint filers.

That means that for every dollar a tax filer earns above those caps, he or she will lose 5 cents of the rebate, said Jason Furman, senior fellow at the Brookings Institution.

Put another way, the rebates of those taxpayers will be reduced by the amount of income above the cap multiplied by 5%, said Mark Luscombe, principal analyst at tax information publisher CCH.

Take a couple with two children. If they make less than the income cap, they will likely get an $1,800 rebate. If they make $15,000 more than the cap, they will see their $1,800 rebate reduced by $750 ($15,000 x 0.05). So instead they will receive a check for $1,050 ($1,800-$750).

A childless couple whose AGI falls below the cap will likely get a $1,200 rebate. But if their AGI exceeds the cap by $15,000, their rebate will be reduced by $750. So they'd get a check for $450.

Single filers with no kids and an income below $75,000 will likely get a $600 rebate. But if they made $80,000, their rebate will be reduced by $250 ($5,000 x 0.05). So they will get a check for $350 ($600-$250).

The point at which the rebate gets phased out entirely will vary. For example, a single filer with no kids whose income exceeds the cap by $12,000 or more will get no rebate, because it will be reduced by an amount equal to or greater than the $600 ($12,000 x 0.05 = $600).

Do I have to pay the rebate back?

No. And here's why.

Your rebate is a one-time tax cut - an advance on a credit you'll receive on your 2008 return.

It's based on your 2007 income initially. If it turns out that your 2008 income and number of children would have qualified you for a larger rebate than the one you received, you'll be sent the difference. If it turns out your 2008 income was lower than in 2007 and you should have gotten a lower rebate, you get to keep the difference.

"If you were supposed to receive a larger payment than you did, you will get the extra money," said Treasury spokesman Andrew DeSouza. "If you received more than what you should have gotten, you will not be penalized."

What do I have to do to get one?

You must file a 1040 or 1040-EZ federal tax return for 2007.

Some people are normally not required to file a return. To get the rebate, however, they have to file a federal tax return.

So when will I get a check?

Treasury Secretary Henry Paulson said Thursday night that the IRS will start sending out checks in early May. Last month, he said it should take about 10 weeks to crank out all the checks. In all likelihood then, you'll see the money sometime between May and early July.

That assumes, of course, that you hit the IRS deadline and file by April 15.

If you're a laggard and have to file for an extension, you'll still get a check but it may not come until the end of the year - probably in time for Christmas shopping.