How the 2008 Tax Rebates Work


President George W. Bush signed into law the Economic Stimulus Act of 2008 on February 13, 2008.
President George W. Bush signed into law the Economic Stimulus Act of 2008 on February 13, 2008.
Alex Wong/Getty Images

If you haven't received them already, you'll soon receive two letters in the mail from the Internal Revenue Service.

"Oh great," you say.

Chin up! These letters bear good news. The first will give you an overview of the Economic Stimulus Act of 2008, which includes the dispensation of tax rebates to taxpayers in the United States. The second letter will confirm whether you are eligible for the rebate, how much money you'll receive and when you'll receive it.

"What?!" you exclaim. "Money from the IRS?"

Indeed, one highlight of the Economic Stimulus Act, signed by President Bush on February 13, 2008, is a tax rebate, which is meant to encourage consumer spending. Rebates will go "to more than 130 million households" in the United States [source: IRS]. The Bush Administration hopes the Stimulus Act's "direct and rapid income tax relief" will stimulate the U.S. economy as recession looms.

So what's the catch? One of the great things about this rebate is that, unlike an income tax refund, the tax rebate is not taxable. Furthermore, the rebate will not affect any refund you might receive this year or next year. The Administration's hope is that this little windfall will encourage consumers to get out and spend some dough, thereby increasing business earnings and, hopefully, encouraging growth.

Ready to start spending your money? Not so fast -- check out the next page to see if you qualify for a rebate.

Who qualifies for a 2008 tax rebate check?

Sen. John D. Rockefeller (D-WV) (left), Sen. Charles Schumer (D-NY) (middle), and Sen. Max Baucus (D-MT) (right) discuss matters during a Senate Finance Committee hearing on 'The Economic Stimulus Act of 2008.' The hearing took place on January 30, 2008.
Sen. John D. Rockefeller (D-WV) (left), Sen. Charles Schumer (D-NY) (middle), and Sen. Max Baucus (D-MT) (right) discuss matters during a Senate Finance Committee hearing on 'The Economic Stimulus Act of 2008.' The hearing took place on January 30, 2008.
Mark Wilson/Getty Images

You must possess some basic prerequisites to be eligible for the tax rebate. The Internal Revenue Service says, "To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return" [source: IRS].

Now for the explanations, exceptions and adjustments.

  • Taxpayers with Individual Taxpayer Identification numbers (ITINs) rather than Social Security numbers are not eligible.
  • Nonresident aliens won't get the rebate, as they cannot obtain Social Security numbers.
  • If you want to claim children under the age of 17, they must also have a Social Security number. Visit the Social Security Administration website if your child doesn't have one.
  • To be eligible for the rebate, you must have at least $3,000 of income.
  • At the high end, your Adjusted Gross Income (AGI), which is your taxable income minus certain deductions, must not exceed specified caps to receive the full rebate.
  • If you file single, married and filing separately, or head of household, your rebate will be reduced if your adjusted gross income is over $75,000 per year.
  • If you file married and filing jointly, your rebate will be reduced if you make a combined $150,000 in adjusted gross income.
  • Wages, salaries, tips, Social Security, some Railroad benefits, self-employment income and veterans' disability income count toward income requirements. Rental real estate income, pension income and Supplemental Security Income (SSI) don't count.
  • If either pension or SSI is your only income, you won't be eligible for the tax rebate, even if this income exceeds the minimum of $3,000.
  • Even if you meet all other qualifications, if you don't file a 2007 federal income tax return, you won't receive the tax rebate.
  • So now that you know whether you qualify, find out how much you could be getting on the next page.

What's my 2008 tax rebate amount?

U.S. Treasury Secretary Henry Paulson (left) and Chairman of the Council of Economic Advisers Ed Lazear (right) hold a briefing on the economy on January 18, 2008, at the White House in Washington, D.C.
U.S. Treasury Secretary Henry Paulson (left) and Chairman of the Council of Economic Advisers Ed Lazear (right) hold a briefing on the economy on January 18, 2008, at the White House in Washington, D.C.
TIM SLOAN/AFP/Getty Images

If you qualify for the tax rebate, here's what you can expect from the rebate program.

  • Taxpayers who file single, married and filing separately, or head of household: $600
  • Taxpayers who are married and filing jointly: $1,200
  • Low-income workers who normally don't file a federal tax return: $300 ($600 if married and filing jointly)
  • For each child under 17 (as of December 31, 2007) whom you claim as a dependent: $300

As mentioned previously, if you have an AGI over $75,000 (if you file single, married and filing separately, or head of household) or $150,000 (married and filing jointly), your rebate will be reduced by 5 percent of the amount over the limit.

For example, if you're a single woman sans children with an income of $78,000, your tax rebate will be reduced by 5% of $3,000 ($78,000 - $75,000 = $3,000).

0.05 x $3,000 = $150

Your filing status would put your rebate at $600, and your reduction is $150, so:

$600 - $150 = $450 rebate

For a jointly filed return (eligible for a $1,200 rebate) with an income of $170,000:

$170,000 - $150,000 = $20,000

0.05 x $20,000 = $1,000

$1,200 - $1,000 = $200 rebate

If the couple has three eligible dependent children, they would receive a bonus of $300 per child, for a total of $900. Their $200 rebate would jump up to $1,100.

So, if you have a single income of $87,000 or a joint income of $174,000, your rebate has fallen to $0, unless you have eligible child dependents.

If you owe taxes this year, or if you're paying taxes on an installment agreement, consider the rebate a discount on your taxes. The IRS will automatically apply your rebate to any outstanding tax liability you might have. In some cases, the IRS may also apply your rebate to other federal debt, such as student loans or child alimony. Visit the IRS website for more information.

To find out when you're going to get paid, read on so you can plan your purchases.

When will I get my tax rebate check?

A mockup of a tax rebate check awaits members of Congress before an April, 2008 news conference on the tax rebate.
A mockup of a tax rebate check awaits members of Congress before an April, 2008 news conference on the tax rebate.
Scott J. Ferrell/Congressional Quarterly/Getty Images

The IRS has developed a systematic approach to dispensing rebate money. The system is based on the last two digits of your Social Security number.

If you have established a direct deposit/debit relationship with the IRS:

  • SSN 00 to 20: IRS will begin deposits on May 2
  • SSN 21 to 75: May 9
  • SSN 76 to 99: May 16 [source: IRS]

If paper is your thing:

  • SSN 00 to 09: IRS will begin mailing checks on May 16
  • SSN 10 to 18: May 23
  • SSN 19 to 25: May 30
  • SSN 26 to 38: June 6
  • SSN 39 to 51: June 13
  • SSN 52 to 63: June 20
  • SSN 64 to 75: June 27
  • SSN 88 to 99: July 11 [source: IRS]

If filing jointly, the last two digits of the SSN of the first person listed on your return will determine when you get the rebate.

Also, the earlier you file, the sooner the IRS can process your return and therefore send you your rebate. You midnight filers and folks that filed extensions will have to wait a little longer.

Now, if you didn't qualify this year, take heart. If your tax situation changes to meet the rebate requirements, you could receive a rebate for your 2008 tax return. Hang on to the rebate letters the IRS sent you, as they will serve as records of why you weren't eligible this year.

If you'd like to know more about the 2008 income tax rebate, income taxes in general and related topics, you can follow the links on the following page.

Related HowStuffWorks Articles

More Great Links

Sources:

  • Investopedia. "Supplemental Security Income (SSI)." http://www.investopedia.com/terms/s/ssi.asp (Accessed 4/19/08)
  • IRS. "2007 Adjusted Gross Income (AGI)." http://www.irs.gov/app/freeFile/html/moreInfo/more_info_agi.html (Accessed 4/19/08)
  • IRS. "Basic Information on the Stimulus Payments." 4/17/08. http://www.irs.gov/newsroom/article/0,,id=179211,00.html (Accessed 4/19/08)
  • IRS. "Economic Stimulus Payment Calculator." http://www.irs.gov/app/espc/ (Accessed 4/19/08)
  • IRS. "Stimulus Payments: Answers to Frequently Asked Questions." 4/17/08. http://www.irs.gov/newsroom/article/0,,id=179181,00.html (Accessed 4/19/08)
  • IRS. "Economic Stimulus Payments Information Center." 3/29/08. http://www.irs.gov/newsroom/article/0,,id=177937,00.html (Accessed 4/19/08)
  • Longley, Robert. "About the 2008 IRS Tax Rebate Checks." 3/18/08. http://usgovinfo.about.com/od/incometaxandtheirs/a/rebates2008.htm (Accessed 4/19/08)
  • Longley, Robert. "IRS Facts About the 2008 Tax Rebate Checks." 2/27/08. http://usgovinfo.about.com/od/incometaxandtheirs/a/irsonrebate.htm (Accessed 4/19/08)
  • Longley, Robert. "Rebate-only Tax Filers May Now File for Free." 3/9/08. http://usgovinfo.about.com/b/2008/03/09/rebate-only-tax-filers-may-now-file-for-free.htm (Accessed 4/19/08)
  • McCormally, Kevin . "Kiplinger Tax Rebate Calculator." Kiplinger.com. 2/13/08. http://kiplinger.com/features/archives/2008/02/tax-rebate-calculator.html (Accessed 4/19/08)
  • McCormally, Kevin. "When to Expect Your Tax Rebate Check." Kiplinger.com. 3/18/2008.http://www.kiplinger.com/features/archives/2008/03/when-to-expect-tax-rebate-check.html (Accessed 4/19/08)
  • Nutting, Rex. "Tax rebates really will boost economy, for a while." Market Watch. 2/13/08. http://www.marketwatch.com/news/story/tax-rebates-really-boost-economy/story.aspx?guid=%7B9FDC0FE4-E244-4912-BCC4-6F317CB5A0BB%7D (Accessed 4/19/08)
  • Pender, Kathleen. "How tax rebates work in stimulus package." 2/12/08. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/12/BUOAV0BJP.DTL (Accessed 4/19/08)
  • Riedl, Brian M. "Tax Rebates Will Not Stimulate The Economy."  The Heritage Foundation. 1/10/08. http://www.heritage.org/Press/Commentary/ed011008c.cfm (Accessed 4/19/08)
  • Sahadi, Jeanne. "Tax rebates: Where's your check?" 1/19/08. http://money.cnn.com/2008/01/18/news/economy/rebate_how_it_works/index.htm  (Accessed 4/19/08)