2008 Tax Rebates: The Details At A Glance

Last week, Congress passed the Economic Stimulus Act of 2008, which requires the U.S. Treasury to send rebate checks to eligible individuals. While the media has described the big picture on these rebates, this Alert outlines the detailed requirements for receiving rebates.

Who gets rebates? Only individual taxpayers can receive rebates; trusts, estates and businesses are not eligible.1 However, not all individuals will qualify for a rebate. People who can be claimed as someone else's dependent are not entitled to a rebate, nor are nonresident aliens or illegal immigrants.

Does that mean all other individuals get rebates? No. To be eligible for a rebate, for 2007 you must either (1) owe tax2; or (2) have at least $3,000 of qualifying income. Qualifying income means earned income generally, social security benefits, and veterans' disability payments (including payments to survivors of disabled veterans).

How much is the rebate? An eligible single person with no qualifying children gets a maximum rebate of $600 or a minimum rebate of $300. An eligible married couple filing jointly with no qualifying children gets a maximum rebate of $1,200 or a minimum rebate of $600. Single taxpayers whose 2007 tax was $600 or more are eligible for the maximum rebate. For married couples filing jointly, the maximum rebate is available if their tax was $1,200 or more. Eligible taxpayers whose 2007 tax was less than the maximum rebate are limited to the greater of the minimum rebate or their2007 tax. For example, a single taxpayer whose 2007 tax was $500 will receive a rebate of $500.

Increased amount for those with one or more qualifying children. Anyone who qualifies for a rebate in any amount gets an additional $300 for each qualifying child. To qualify, a child must be under the age of 17, live with the taxpayer for more than half of the year, and be the taxpayer's child, step-child, sibling, step-sibling, or descendant. In addition, the child must not have provided more than half of his or her own support. Thus, for example, a married couple filing jointly with two qualifying children could be eligible for a maximum rebate of $1,800.

How does higher income affect a potential rebate? The amount of the rebate (both the basic and the child's amount) is reduced by 5 percent of a taxpayer's adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). For example, a married couple filing jointly with no children and 2007 AGI of $160,000 would receive...