Tax Rebate Act

Economic Stimulus Act of 2008 (HR 5140)

Congress has passed the Economic Stimulus Act of 2008, and it's expected that the President will sign the bill into law shortly.

Starting in May, the Treasury will begin sending stimulus payments to more than 130 million individuals. The stimulus payments will go out through the late spring and summer.

The majority of people receiving a payment only need to file a 2007 tax return as they normally would. The IRS will then do all the rest, including determining eligibility and payment amounts.

Recovery Rebates

Amount of rebate:

Eligible individuals must have either of the following:

1. Qualifying income of at least $3,000 (qualifying income is defined as earned income, social security benefits, and/or disability benefits paid to veterans and surviving spouses).

2. Net income tax liability of at least $1 and gross income that is more than the applicable standard deduction + 1 exemption amount (2 exemptions for Married Filing Jointly). Generally, net income tax liability is the regular tax + AMT (if any) less allowable credits other than the Child Tax Credit and refundable credits, such as the Earned Income Credit.

The act does not apply to nonresident aliens, individuals who could be claimed as dependents, individuals who do not have valid SSNs, and estates and trusts.

Phaseout

The rebate is reduced by 5% of adjusted gross income exceeding $75,000 ($150,000 for joint returns).

So for taxpayers without children, the maximum rebate is fully phased out at $87,000 ($174,000 for joint returns).

Business Provisions

Under the bill, the Section 179 deduction increased to $250,000 (phaseout to start at $800,000) for 2008 (amounts would have been $128,000 and $510,000, respectively).

There will be a 50% bonus depreciation for property placed in service in 2008. Both provisions apply to 2008 only.