2008 Tax Rebate Information
by: Iowa Legal Aid
2008 Rebate Credit Information Sheet
Requirements and Credit Limits
President Bush signed a "Stimulus"package on Wednesday, February 13, 2008. Included in this legislation is a tax rebate. Those taxpayers who qualify for the rebate and file a 2007 tax return will receive a rebate check in May or June of 2008. The criteria is set forth below.
Maximum credit for taxpayers: The lesser of
- $600 for individuals and $1,200 for joint filers. (NOTE: Higher income taxpayers get a reduced amount) or
- The net income tax liability plus additional amounts for any qualifying child(ren).
Lower Income individuals having "qualifying income" of at least $3,000 will get:
- $300 ($600 for joint filers) plus additional amounts any qualifying child(ren).
Qualifying income consists of one of the following:
- Earned Income,
- Social Security Income (Old Age, Survivors, Disability and Tier 1 Railroad Benefits), or
- Veteran's pension or Veteran's compensation.
Amount of credit for qualifying child: $300 per child
Who won't get anything?
- FIP and SSI recipients who don't meet the earned income requirement.
- Holders of valid Social Security Administration issued numbers who file jointly with ITIN holders.
- Dependent taxpayers filing a return.
Qualifying child:
- Taxpayer's child must meet the qualifying child definition as set forth in the child tax credit rules. However, this special child credit excludes children who do not have a valid number issued by the Social Security Administration.
Divorced, Legally Separated, and never married parents:
- The child tax credit follows the dependency exemption. It would appear that the $300 will follow the dependency exemption also. This means a non-custodial parent claiming the dependency exemption in 2007 will get this $300 rebate credit. It is unclear what will happen in a situation where parents alternate the dependency exemption. It may be that the parent claiming the child for 2007 will get $300 and the parent who files their taxes in 2008 claiming the child will get the credit against his or her taxes.
How to Claim It:
- File a 2007 tax return by the due date or by the time of any extension. Late filed returns will still get the rebate if filed and processed before December 31, 2008. Social Security recipients, Veterans and other low-income individuals with "qualifying income" will need to file a return even if they have no filing obligation.
Treatment of 2008 Rebates
Federally-Funded Assistance Programs such as Food Stamps, TANF, Medicaid:
- The rebate will not be considered income in month of receipt and not be considered a resource for the month of receipt and the two months following the month of receipt.
Rebate larger than actual 2008 liability
This rebate is based upon 2007 tax return amounts. For example, in 2007, taxpayer had a net tax liability of $600 and received a rebate check in 2008 for $600. Taxpayer loses her job in 2008 and has no net tax liability for 2008. The $600 received in 2008 will not result in an amount due or reduction in any refund due.
Rebate smaller than actual 2008 liability
An additional credit may be available if tax liability is larger in 2008 than 2007. For example, taxpayer was entitled to a $500 check based upon 2007's net tax liability. In 2008, taxpayer actually has a net tax liability of $700. Taxpayer will be able to claim an additional $100 credit when she files her 2008 tax return in 2009.
Examples of rebate determination
The following examples show the rebate amounts as calculated from the taxpayer's 2007 tax return.
Example 1.-A single taxpayer has $14,000 in Social Security income, no qualifying children, and no net tax liability prior to the application of refundable credits and the child credit.
The taxpayer will receive a rebate of $300 for meeting the qualifying income test.
Example 2.-A head of household taxpayer has $4,000 in earned income, one qualifying child, and no net tax liability prior to the application of refundable credits and the child credit.
The taxpayer will receive a rebate of $600, comprising $300 for meeting the qualifying income test, and $300 per child.
Example 3.-A married taxpayer filing jointly has $4,000 in earned income, one qualifying child, and no net tax liability prior to the application of refundable credits and the child credit.
The taxpayer will receive a rebate of $900, comprising $600 for meeting the qualifying income test, and $300 per child.
Example 4.-A married taxpayer filing jointly has $2,000 in earned income, one qualifying child, and $1,100 in net tax liability (resulting from other unearned income) prior to the application of refundable credits and the child credit (the taxpayer's actual liability after the child credit is $100). The qualifying income test is not met, but the taxpayer has net tax liability
for purposes of determining the rebate of $1,100.
The taxpayer will receive a rebate of $1,400, comprising $1,100 of net tax liability, and $300 per child.
Example 5.-A married taxpayer filing jointly has $40,000 in earned income, two qualifying children, and a net tax liability of $1,573 prior to the application of refundable credits and child credits (the taxpayer's actual tax liability after the child credit is -$427). The taxpayer
meets the qualifying income test and the net tax liability test.
The taxpayer will receive a rebate of $1,800, comprising $1,200 (greater of $600 or net tax liability not to exceed $1,200), and $300 per child.
Example 6.-A married taxpayer filing jointly has $175,000 in earned income, two qualifying children, and a net tax liability of $31,189 (the taxpayer's actual liability after the child credit also is $31,189 as the joint income is too high to qualify). The taxpayer meets the qualifying income test and the net tax liability test. The taxpayer will, in the absence of the
rebate phase-out provision, receive a rebate of $1,800, comprising $1,200 (greater of $600 or net tax liability not to exceed $1,200), and $300 per child. The phase-out provision reduces the total rebate amount by five percent of the amount by which the taxpayer's adjusted gross income exceeds $150,000. Five percent of $25,000 ($175,000 minus $150,000) equals $1,250.
The taxpayer's rebate is thus $1,800 minus $1,250, or $550.
| The information in this article was not intended or written to be used and cannot be used to avoid penalties under the Internal Revenue Code. |
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