Tax Rebate Plan

If you didn't get a 2008 tax rebate, or only a partial one, you might under certain circumstances qualify for what's known as a "recovery rebate credit" in 2009.

The IRS gave out $95 billion in stimulus payments in 2008, thanks to the Economic Growth Act enacted Feb. 13 of that year.  The act was designed to stimulate the economy by providing payments of as much as $600 per person, $1,200 per couple and $300 per child to most Americans.  

The IRS expects to distribute another $10 billion worth of stimulus payments in 2009 to millions of people who:

• Are eligible, but didn't get one in 2008
• Got a partial payment, but are entitled to more based on their 2008 financial situation
• Weren't eligible last year but are now , due to a change in their circumstances

What kinds of changes? These could include a decrease or an increase in income, or the birth or adoption of a child in 2008.

If you should qualify, the rules remain generally the same as the prior year, but you would receive your payment in a different way.

The original tax rebates, or stimulus payments, were sent to recipients in 2008, either by mail or by direct deposit to  their bank accounts—separate and apart from their regular tax refunds.

With the recovery rebate, however, you wouldn't get a payment separately. If you qualify, it would be applied to your 2008 taxes. So you would either get a larger refund or owe less tax.

TurboTax will do the calculations for you, tell you whether you qualify for a recovery rebate, and let you know how it affects your taxes.

If you owe no 2008 taxes, but earned at least $3,000 in wages in 2008, or had Social Security, Railroad Retirement or certain veterans' benefits of at least $3,000 for the year, you could qualify for a minimum rebate of $300 per person.

Service members can use their nontaxable combat pay to qualify for rebates as well.

TurboTax wants to make it easy for  you—whether you're doing your own return or helping a family member or friend to file.

Prepare and file a return using the Free Edition of TurboTax. There is no charge for Free Edition, which is intended for filers with simple returns. You can prepare a tax return and e-file it , both at no cost.

• Do I need to apply to get my rebate?
• How much could I get?
• Are there people who don't qualify?
• What are the income cutoffs for higher income taxpayers?
• Can I use a number different than my Social Security number to qualify?
• What counts as qualifying income?
• Will a rebate reduce my Social Security payments?
• Will this affect my 2008 return?
• What if I have an outstanding tax bill or owe back child support?
• How will I know if I'm getting a rebate?

Do I need to apply to get my rebate?

No, most people who are eligible for the recovery rebates need only file their 2008 income tax returns to get theirs. TurboTax will tell you if you qualify when you file your tax return.

How much could I get?

It depends on whether you got a full or partial payment in 2008—and your 2008 income, how many children you have: and the 2008 federal taxes you're required to pay.

• If you’re single and owe, or have paid, $600 or more in 2008 taxes, the maximum is $600.
• If you are married and have 2008 taxes of $1,200 or more, the maximum is $1,200.
• If you’re single and have taxes of more than $300, but less than $600, you will get a payment equal to your tax liability. So if you paid or will pay $400 in 2008 taxes, you could get a $400 rebate.
• If you're married, and have taxes of more than $600, but less than $1,200, again, you could get a rebate equal to your taxes. 
• Also, if you owe no 2008 taxes, but earned at least $3,000 in wages in 2008 or had Social Security, Railroad Retirement or certain veterans' benefits of at least $3,000 for the year, you could get a minimum rebate of $300 per person.
• If you or your spouse had nontaxable combat pay of more than $3,000, you could get at least $300 per person, or $600 per couple, plus $300 per child.
• In addition, a rebate of $300 per child could be given, with no limit on the number of children. To qualify, a child must be age 16 or younger as of December 31, 2008. Older children who can be claimed as dependents, such as college students, do NOT qualify.

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Are there people who don't qualify?

Yes.

• Anyone who can be claimed as a dependent on someone else’s return. This would include a child, age 17 or above claimed as a dependent on a parent's return, for example, a college student. It would also include an adult dependent, such as an elderly parent.
• Non-resident aliens.
• Anyone who pays no income tax and whose qualifying income (see definition below) is less than $3,000 for 2008.
• Anyone without a Social Security number, with one exception, for spouses of military service members 
• Some higher-income earners. See below.
• Anyone who doesn't file a 2008 tax return.

What about people who died in 2008? Can their survivors get a rebate?

Assuming an individual was otherwise qualified in 2008, the IRS could issue a rebate in that person's name or to the account designated by that person on a 2008 tax return. This applies whether the person died after filing, or the final income tax return was filed by a surviving spouse or personal representative. 

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What are the income cutoffs for higher income taxpayers?

Higher-income taxpayers get partial stimulus payments or none at all.

This is determined by a taxpayer's Adjusted Gross Income, or AGI. That's total income minus certain adjustments, like IRA contributions.

Stimulus payments are reduced starting at $75,000 AGI for single persons, and $150,000 AGI for married couples. A payment is decreased by 5 percent of AGI income over the limit.

However, if the taxpayers have children, the calculations get a bit tricky.

The good news is that they might qualify for more money than the income cutoffs would seem to allow. And TurboTax figures it out for you.

Here's how it works:

• A single woman with no children, who pays more than $600 in taxes, could in theory qualify for a $600 rebate. If her AGI is $80,000, and therefore above the $75,000 limit, her rebate is reduced by $250 (that's 5 percent of the $5,000 over the limit) for a payment of $350. However, if the same woman has two children, her stimulus payment is $950. That's $600 for herself plus $300 for each child, or $1,200, minus $250 (the 5 percent over the limit).
• A married couple with no children, who pay more than $1,200 in taxes, could in theory get a $1,200 rebate. If  their AGI is $180,000, they would get no rebate. That's because 5 percent of the $30,000 over the limit is $1,500, which exceeds the $1,200 rebate.  However, if the same couple has three children, they get a stimulus payment of $600. That's $1,200 for the couple, plus $900 for the three children for a total of $2,100, minus $1,500 (or 5 percent of the $30,000 over the threshold).

Taxpayers who had high incomes in 2007, but saw their incomes drop in 2008, could qualify for a recovery rebate.

• If the single woman with two children, in the example above, saw her income drop from $75,000 in 2007 to $70,000 in 2008, she could get a recovery rebate of $250, in addition to the $950 based on her 2007 return. The $250 had been subtracted from her $1,200 stimulus payment because she was over the limit the first year.

What counts as qualifying income?

Earned income, or wages, self-employment earnings and Social Security, Railroad Retirement and certain veterans' benefits. 

Certain other kinds of income do not count toward the $3,000 annual 2008 minimum: dividends, interest, capital gains, distributions from Individual Retirement Accounts (IRA), and non-Social Security and non-veterans' pension income.

Supplemental Security Income (SSI) does not count as qualifying income.

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Will this affect my 2008 return?

If you qualify, it would either reduce the taxes you owe, or increase your refund.

What if I have an outstanding tax bill or owe back child support?

Your recovery rebate credit would be applied to pay your back taxes or child support.

How will I know if I'm getting a rebate?

TurboTax will let you know when you are preparing your 2008 tax return.

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Visit the IRS Economic Stimulus Payments Information Center.