Tax Rebate Winners and Losers

Yahoo has a good Q&A on the economic stimulus act just passed by Congress including the answers to the following questions:

• Will I get a check?
• How much will I get?
• Will I get more for my child?
• Who won't get a rebate?
• What do I need to do?
• When can I expect my money?
• Will a refund affect my rebate?
• Rebate boosting tax moves

It's probably the best summary I've seen on this issue.

Comments

[Richard]

Again it's a shell game. Like the 2001 rebate this money is simply an advance from your 2008 returns. From Yahoo

"But filers will have to reconcile any money they receive this year when they file their 2008 returns.
"It harks back to the 2001 situation when we got the new 10 percent bracket and got an advance check for that. Then on next return had to account for it," says Luscombe. "It's expected to be that way this time."

The 2008 tax forms should have a line for the new credit. When calculating taxes next year, taxpayers will have to subtract what they got as a rebate check the previous summer.

Some people might think that's unfair," says Luscombe, "but they got the money, and they got it early."

It's nice to get a check in the mail but I wish Congress would do something productive, like fix Social Security rather then make power plays and encouraging Americans to buy they don't need.

[Kevin]

I don't think there are any "losers" when you consider everyone is getting rid of the 10% tax bracket for 2008. I guess the government loses out on the revenue, but that's about it.

[Zook]

Winners are folks that put this $1200 or whatever they got coming to them in May and invest it or pay off debt they already have. Throw it all into the Roth IRA.

Use this potentially large "pre-bate" to get your finances in order, not spend more.

There will be plenty of folks who leverage this $1200 into a $2000 LCD TV with 15% financing on their Best Buy credit card. Don't be one of them.

And plan on a robust push from retailers to get you to spend the money with "sales" and "deals" come May/June. Thousands upon thousands of folks with $600-$1200+ burning a hole in their pocket and you can expect Wal-Mart, GAP, Best Buy etc. to want to you come spend it.

[FMF]

Kevin --

I think those that are paying taxes but get nothing out of this deal (high earners) are losers in the overall scheme here.

[Zook]

I don't have an issue with some single guy making five million a year not getting his $300, but the income limits do seem low.

Maybe it's just me.

[Mike]

I'm okay with the rebates. Unless I am misinterpreting it, one thing people seem to miss about the "advance" part is that in your 2008 taxes you are getting this extra rebate. The government is sending it to you in the next few months instead of making you wait until you file your 2008 taxes. When you do file your 2008 taxes you need to account for this otherwise you will get it twice (would be nice but the Government isn't THAT generous!). Plus you have the opportunity to claim more of a rebate at that time if your situation warrants it.

This is not like a "loan" that you are paying back next year. You would not have gotten this extra money without the program passed by Congress. Some people seem to think this is just money they are getting now that will cause them to pay more taxes next year. That's not really true.

[Paul]

One question: I haven't seen any mention of an upper limit. We have four children under the age of 17, so I'm thinking my wife and I would get $2400. Is this correct, or is there a ceiling to this rebate?

[FMF]

Paul --

Click through and read the article. I think it answers your question.

[Amy]

Thanks for posting this excellent summary. The first draft of our 2007 return shows our AGI at $151,000 (married filing jointly). I was so annoyed that we were just barely above the threshhold. Now it seems we should only "lose" $50, and should still get $1150. Not bad. Looking forward to makng a dent towards our aggressive debt pay off goals. Thanks!

[Paul]

FMF--

Ok, I've read through the article (twice actually) and I still don't see anywhere that says if there is a limit for the number of children you can claim or a maximum rebate you can receive. I guess you can assume that since it is not specified, there is no limit, but I hate to assume. Am I missing a line that does specify a limit or says there is no limit to the number of children you can claim (that are under 17 years)?

[FMF]

Paul --

Ok, I thought your question was an upper limit on the refund or on income -- it wasn't clear from your first posting.

Not sure about the number of kids issue. Anyone know?

[Kevin]

FMF - high earners get the rebate too, but may have to wait for part of it until next tax season. I still wouldn't call that "losing" since they are better off than before this law.

Here is another link to a WSJ article "The Skinny on the Stimulus Plan" and it says that you will not be taxed on the payments and they are not a advance of a 2008 refund. I know that there have been rumors about this, but this article quotes congressional staffers so I tend to believe it.

http://online.wsj.com/article/SB120286096062963791.html?mod=money_page_left_hs

[Mark]

I'll assume most everyone on this blog has NO revolving credit card debt. Having said that, I think the best use for the tax refund, after paying off any credit card debt, is to invest the money in your home. Specifically, some American-made kitchen appliances or building products that add value and keep your home's marketability sound versus your neighbors'.

If you are really worried about the future chaos, or rampant crime from an economic meltdown, then I would suggest another American-made product...Smith & Wesson!