Tuesday, January 27, 2009

The Great Rebate

Can you apply for a stimulus rebate check when filing your 2008 tax return if your 2008 income was lower than your 2007 income?

Yes it is true. People who didn't qualify for the full rebate check last year have a second chance to get the money when they file their 2008 tax return.

Those rebate checks that most people received last spring and summer were actually a tax credit for 2008, which would normally reduce your 2008 tax bill. But to get the money into people's hands quickly to stimulate the economy, Congress had the IRS make a prepayment of the credit. That meant the rebate was figured based on information from your 2007 return.

Most single filers received a $600 rebate, and married couples received $1,200, plus $300 for every dependent younger than 17. The rebate amount started to phase out if your 2007 adjusted gross income was more than $75,000 for single filers, or more than $150,000 for married couples filing jointly. For people who earned more than that, the rebate was reduced by $50 for every $1,000 you earned above the income limit. It phased out entirely at $87,000 for single filers without children and $174,000 for joint filers without children.

If you earned too much to qualify based on your 2007 income, but earned less than those limits in 2008, then you'll be able to claim the rebate when you file your 2008 taxes.

You may also qualify for some rebate money this year if you had a child in 2008, or if you were originally ineligible for a rebate because you could be claimed as a dependent on another person's tax return in 2007 but cannot be claimed as a dependent in 2008.

If you didn't originally qualify for the rebate but do this time around, then the amount will be a credit on your 2008 tax return and will be included in your refund (not sent as a separate check). You can figure out the credit when you file your form 1040 for 2008 -- the instructions for form 1040 include the calculation, or your tax-filing software will figure the credit for you.

The IRS also has some new resources to make it easy to figure out if you'll be getting the rebate. See the IRS's Recovery Rebate Credit Information Center and Questions and Answers About the Recovery Rebate Credit at the IRS's Web site.

People who had a good year don't need to worry: If you earned more in 2008 than you did in 2007, you don't have to pay back the rebate.

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