I am proud to have been a leader in passing the bipartisan economic stimulus package that was signed into law by President Bush earlier this month. Our plan gets immediate relief to hardworking American families who are struggling. But our work in Congress is far from complete. We must do all we can to strengthen this economy, and I will continue to focus my efforts on the areas of great concern to all Americans: affordable healthcare, tax fairness for middle class families, and ensuring our 21 st century economy creates well paying jobs with good benefits
Many of my constituents have questions about what the economic stimulus package personally means to them, and I am committed to working every day to answer questions and provide information so that hard working American families receive their full rebate checks in a timely manner.
To help better answer your questions, I have put together some frequently asked quested and answers, as well as examples of how the rebate will impact different categories of individuals and families. Please note, while this document attempts to help you understand the stimulus package and the rebate amount you may be eligible for, the information provided here contains simplified examples and rough approximations. Since each individual and family has a different tax situation, you should only use the information below as a point of reference.
If you would like free assistance filling out your tax forms, you may wish to contact the IRS Tax Counseling for the Elderly and the AARP Tax Aide program. Call AARP at 1-888-227-7669 to obtain service locations near you.
You may also want to contact the IRS Volunteer Income Tax Assistance (VITA) program at 1-800-906-9887. VITA sites help low- and moderate-income folks file their taxes.
If you have any additional questions, please do not hesitate to call my offices in Philadelphia, Jenkintown or Washington, DC.
Top Questions about the Economic Stimulus
Q: Who gets a rebate?
A: Anyone who pays taxes or earned at least $3,000 in 2007, whether through employment and investments, or through Social Security and veterans' disability benefits. Single individuals with incomes of more than $75,000 and couples with incomes of more than $150,000 will get a partial – or no – rebate depending on how much they earn above those levels.
Q: Who does not get a rebate?
A: People who earned less than $3,000 in 2007; people who do not have Social Security numbers; illegal immigrants; and anyone who does not file a tax return.
Due to the income limits, single filers with incomes exceeding $87,000 and couples with incomes exceeding $174,000 will not get any rebate. These income caps are increased by $6,000 per child 17 years old or younger that the individual or couple claim as dependants.
Q: What do you have to do to get the rebate?
A: Eligible taxpayers must file a 2007 tax return with a Social Security number for the filer, as well as any spouse or dependent children. (Please note that unless you file for an extension, all 2007 tax returns must be submitted to the IRS by April 15, 2008.)
Q: How much will the rebate be?
A: Single taxpayers will get a rebate of at least $300, with couples receiving at least $600. The rebate will equal the taxes paid for 2007, up to $600 for singles and $1,200 for couples, plus an additional $300 per child. That amount will be reduced by $50 for every $1,000 in income above the income limits of $75,000 for singles and $150,000 for couples.
People who earned too little to pay taxes but earned at least $3,000 in 2007, including elderly people whose only income is from Social Security and veterans who live on disability payments, will get a flat $300 if single or $600 if a couple.
Q: How are the rebates calculated?
A: Rebates are calculated on the basis of taxpayers' 2007 Adjusted Gross Income (AGI). Adjusted gross income (AGI) is defined as your taxable income from all sources including wages, salaries, tips, taxable interest, ordinary dividends, taxable refunds, credits, or offsets of state and local income taxes, alimony received, business income or loss, capital gains or losses, other gains or losses, taxable IRA distributions, taxable pensions and annuities, rental real estate, and other income MINUS specific deductions including educator expenses, the IRA deduction, the student loan interest deduction, and the tuition and fees deduction.
Rebates for low-income people who don't pay taxes, including disabled veterans and the elderly, will be a flat $300 for single taxpayers and $600 for couples.
Q: When will the rebates arrive?
A: The Treasury Department says the IRS will begin sending out rebates in May.
Q: Will the rebates be deducted from taxpayers' regular tax refunds?
A: No, these rebates are in addition to any tax refunds, now or in future years.
More Information about the Economic Stimulus
Q: How much will I get as a rebate?
A:It depends on your Federal tax bill. Everyone who received over $3,000 in 2007 is eligible for a rebate check of at least $300 ($600 for married couples) – whether it was in working income, Social Security, or veterans payments, regardless of their Federal income tax liability. In general, taxpayers with Federal income tax liability over $300 will receive the lesser of their tax liability or $600 ($1,200 for married couples).
- For taxpayers with Federal Income Tax Liability
The package will provide middle-income working families with a tax rebate equaling their total Federal income tax liability, up to $600 for single people and $1,200 for married couples filing jointly. In addition, these taxpayers would receive a $300 rebate for each child that is under the age of 17 as of December 31, 2007.
These rebates are subject to be phased out for taxpayers with Adjusted Gross Incomes that are more than $75,000 for single filers or $150,000 for married couples filing jointly.
- For taxpayers with No Federal Income Tax Liability
This stimulus will also provide rebate checks to over 35 million Americans who do not pay Federal income tax, as they may earn too little, or those who receive Social Security or veterans’ disability benefits.
To qualify, a worker must have made at least $3,000 in income in 2007 and either not be responsible for Federal income tax or have a Federal income tax burden of LESS then $300 (single) or $600 (married couples) in 2007. These Americans will be eligible to receive a rebate of $300 if they file as a single individual or $600 for married couples filing jointly. In addition, these taxpayers would also receive a $300 rebate for each child that is under the age of 17 as of December 31, 2007.
- Social Security and Disabled Veterans Payments Recipients
The 20 million Americans who live on Social Security payments, and 250,000 disabled veterans and their widows, are also eligible for rebate checks.
Q: Is there a maximum income limit to be eligible for rebates?
A: The rebate checks are subject to be phased out for taxpayers with an Adjusted Gross Income (AGI) in excess of $75,000 (or $150,000 married filing jointly). The phase-out is a decrease in benefits equaling approximately $50 per $1,000 in income over the threshold limit. (See more detailed explanation on page 9 of this packet)
Q: What do I have to do to get my rebate check?
A: If you would normally file a 2007 income tax return, you do not have to do anything different to claim your rebate check. Just file your tax return as normal, and the IRS will send your check starting in May.
If you would NOT normally file a 2007 tax return, because you do not owe Federal income tax, you MUST file a return in order for the IRS to have a record of you and to calculate your rebate check.
Q: Do I need a Social Security Number (SSN) to receive the rebate check and the child benefits?
A: YES. For both the taxpayer rebate and the child credits, only taxpayers with valid Social Security numbers may qualify. For couples filing jointly, BOTH spouses must have a valid Social Security number. To claim a child for the child rebate, each child must also have a valid Social Security number.
This prevents illegal immigrants from receiving rebates under the stimulus package.
***Individual Tax Identification Numbers (ITINs) will NOT be accepted.
Q: I have never filed a tax return before, because I have never owed the Federal Government tax money. I hear that I may be eligible for a rebate check. How do I claim my rebate check?
A: In order to claim the rebate check, you MUST file a 2007 income tax return (due April 15, 2008) – even if you do not owe the government any money. This is the only way the IRS will have your information on record and be able to calculate and send your rebate check.
***Additionally, for Americans who do not file a tax return but who do work, you MAY also qualify to receive the Earned Income Tax Credit, which provides a Refundable Tax Credit, or another refund check, to bolster your income. This is only for working people.
Q: Will the government mail me a check?
A: Rebate checks will be sent by the same method you use to receive your normal refund checks.
If you receive your normal tax refund checks via direct deposit – where the IRS directly deposits your refund check into your bank – the IRS will use this same Direct Deposit information for your rebate check.
If you normally receive your refund check in the mail as a paper check from the IRS, this is how you will receive your rebate check.
Q: The 2001 tax rebate checks were later taxed on my 2002 tax returns. Will that be the case again with this rebate?
A: NO – these rebates are all tax free. These checks will have no effect on your 2008 returns. And, these rebates will NOT be subtracted from any future tax refunds that you may be eligible to receive in future years.
Q: Logistically, how will these rebate checks be calculated and distributed, since they are based on 2007 returns that must be filed by April 15, 2008?
A: The IRS will simply use your existing 2007 forms and pull the information from the return once it is filed. Everything the IRS needs is already on your tax forms. So any American expecting a regular refund check (outside of this special rebate stimulus) should expect a second check afterwards, representing the stimulus “rebate”.
Q: When will I receive the rebate check in the mail?
A: All rebate checks should be delivered between May and July. Please note that these rebates are calculated off of your 2007 tax returns, which must be filed by April 15, 2008. A rebate cannot be calculated until your 2007 tax return is filed.
Q: What age does my child have to be to get an additional $300 rebate?
A: The child must be listed as under 17 years of age on your 2007 tax returns. This means your child must have been under 17 years of age as of December 31, 2007.
Q: Is there a cap on the number of children under 17 one can claim to get the $300 per child rebate?
A: NO – there is no cap. For example, if you qualify for the $300 child rebate, and have 5 children, you can get a total of $1500 for the child rebate.
Q: I am over 17 years old and I worked and earned over $3,000 in earned income in 2007. However, I am still claimed as a dependent on my parents’ tax return. Do I qualify for the rebate?
A: NO - if you are claimed as a dependent on another's tax return, you do not qualify for a rebate. Additionally, since you are over 17, your parents cannot receive a child rebate for you.
Q: Do retired senior citizens living only on Social Security receive any rebate checks?
A: YES. 20 million senior citizens living on Social Security, as well as over 250,000 disabled veterans and their widows, will receive this rebate check.
Q: Are dividends and other unearned income counted as income for the purposes of calculating Adjusted Gross Income phase-out limits?
A: Yes. Dividends and other unearned income count towards the Adjusted Gross Income phase-out amounts for the rebate checks.
Q: My wife and I are retired senior citizens filing jointly. We receive Social Security, but also receive unearned income from IRA distributions, which means we do pay Federal income taxes on this unearned income. Am I eligible to receive this rebate check, even if I did not have earned income in 2007, since I have to pay Federal income tax on my IRA distributions?
A: YES - You should be eligible for the rebate check in this case. Taxpayers are eligible to receive the rebate check if they had either $3,000 in total income in 2007 OR net income tax liability. Again, as everyone’s tax situation is different, one can not accurately predict whether you will receive a rebate check, but it is possible in this situation.
Q: Does the stimulus package provide help to address the mortgage crisis?
A: YES. The package would temporarily increase the size of mortgage loans, known as the conforming loan limit, from the current $417,000 to a maximum of $729,750. This will help home-owners in high-cost urban areas, like New York City, buy, sell or refinance their homes.
The bill would also raise the cap on Federal Housing Administration mortgage loans from $367,000 up to $729,750, freeing up capital and helping people with subprime mortgages refinance out of these mortgages.
Overall, the stimulus will strengthen the Federal government’s ability to ensure critically needed mortgage loans for low and middle income families by authorizing no or almost no down payment loans; direct the Federal Housing Administration to serve higher risk borrowers who would otherwise turn to predatory loans; and raise loan limits so that Federal government can help in Queens and the Bronx, where housing values are above the national average.
Additionally, to help borrowers who may be facing either foreclosure or higher monthly mortgage payments due to an Adjustable Rate Mortgage or other unique financing schemes, there is the Hope Now program. It was established by the U.S. Department of the Treasury, the U.S. Department of Housing and Urban Development and some of the nation's largest banks. This program works with homeowners to help them adjust their mortgage terms to remain in their homes. If you are at a threat of a higher mortgage payment or foreclosure, you should contact the Hope Now Program at 888-995-HOPE or on the Internet at www.hopenow.com.
Q: What kind of tax cuts would businesses get?
A: The package includes about $50 billion in tax cuts for corporations:
- 50% bonus depreciation – This will allow all businesses to immediately write off 50 percent of the purchase cost of new plants and other equipment. It is called “bonus” depreciation, as you get to accelerate your depreciation in a shorter time frame.
- Small Business Expensing (Section 179) is doubled from its current rate of $128,000/$510,000 to $250,000/$800,000 for 2008. This deals with how small businesses write off equipment purchases.
The goal of doubling Section 179 is to allow small businesses to more easily afford large capital expenses such as store updates, or new equipment and technology. Under Section 179 of the Internal Revenue Code (IRC), business taxpayers have the option of deducting (or expensing) the cost of qualified assets (or property) they purchase in the year when the assets are placed in service, within certain limits. In 2007, the maximum expensing allowance is $112,000 for firms.
Phase-out Limits for Rebate Checks
The rebate checks are subject to be phased out for taxpayers with an Adjusted Gross Income (AGI) in excess of $75,000 (or $150,000 married filing jointly). The phase-out is a decrease in benefits equaling approximately $50 per $1,000 in income over the threshold limit.
How would the Phase-Out work in real world terms?
SINGLE, NO CHILDREN (filing alone – no children) from Bryn Mawr College. She is married and has two grown sons.
Adjusted Gross Income |
Rebate amount |
$75,000 |
$600 |
$76,000 |
$550 |
$77,000 |
$500 |
$78,000 |
$450 |
$79,000 |
$400 |
$80,000 |
$350 |
$81,000 |
$300 |
$82,000 |
$250 |
$83,000 |
$200 |
$84,000 |
$150 |
$85,000 |
$100 |
$86,000 |
$50 |
$87,000 |
zero rebate |
MARRIED WITH 2 CHILDREN UNDER 17
Using this example of a married couple filing jointly with two children under the age of 17, it is easiest to calculate by thinking you have an $1800 rebate that phases out at the rate of $50 per $1000 over the joint income limit of $150,000.
Adjusted Gross Income (Joint) |
Rebate amount |
$150,000 |
$1200 + $600 (for children) = $1,800 total rebate |
$151,000 |
$1150 + $600 = $1,750 |
$152,000 |
$1100 + $600 = $1700 |
$153,000 |
$1050 + $600 = $1650 |
$154,000 |
$1000 + $600 = $1600 |
$155,000 |
$950 + $600 = $1,550 |
$156,000 |
$900 + $600 = $1500 |
$157,000 |
$850 + $600 = $1450 |
$158,000 |
$800 + $600 = $1400 |
$159,000 |
$750 + $600 = $1350 |
$160,000 |
$700 + $600 = $1300 |
$161,000 |
$650 + $600 = $1250 |
$162,000 |
$600 + $600 = $1200 |
$163,000 |
$550 + $600 = $1150 |
$164,000 |
$500 + $600 = 1100 |
$165,000 |
$450 + $600 = 1050 |
$166,000 |
$400 + $600 = 1000 |
$167,000 |
$350 + $600 = 950 |
$168,000 |
$300 + $600 = 900 |
$169,000 |
$250 + $600 = 850 |
$170,000 |
$200 + $600 = 800 |
$171,000 |
$150 + $600 = 750 |
$172,000 |
$100 + $600 = 700 |
$173,000 |
$50 + $600 = 650 |
$174,000 |
$0 + $600 = 600 |
At this point, the child rebate also starts to phase out in the same increments once the "adult' rebate is completely phased out
$175,000 |
$550 |
$176,000 |
$500 |
$177,000 |
$450 |
$178,000 |
$400 |
$179,000 |
$350 |
$180,000 |
$300 |
$181,000 |
$250 |
$182,000 |
$200 |
$183,000 |
$150 |
$184,000 |
$100 |
$185,000 |
$50 |
$186,000 |
ZERO |
Examples
Taxpayers with Federal Income Tax Liability
Example 1 – married couple, filing jointly with 2 children under age 17, annual Adjusted Gross Income of $150,000. Their income tax liability is $3,600 for 2007. The bill provides for a tax rebate check of the lesser of their income tax liability ($3,600) or $1,200 (for married couples filing jointly).
Rebate:
$1,200 (married filing jointly)
+$300 child #1
+$300 child #2
TOTAL REBATE = $1,800
Example 2 – married couple, filing jointly with 2 kids under age 17, annual Adjusted Gross Income of $186,000. Their income tax liability is $4,000 for 2007. The bill provides for a tax rebate check of the lesser of their income tax liability ($4,000) or $1,200 (for married couples filing jointly) but the phase-out kicks in starting at $150,000. So what happens? $186,000 is the first point where a married couple is completely phased-out of all rebates – both individual and child
TOTAL REBATE = ZERO
Example 3 – single person, no children, with an annual Adjusted Gross Income of $25,000 and an income tax liability of $487. The package provides for a tax rebate check of the lesser of his income tax liability ($487) or $600 (for a single person filing).
Rebate:
$487 – single person filing alone
No children, so no rebates
TOTAL REBATE = $487
Example 4 – married couple (filing jointly), 4 children, three under 17, one age 19, annual Adjusted Gross Income of $85,000, with a tax liability of $2,000 in 2007.
Rebate:
$1,200 – married couple filing jointly
+$300 – child #1 under age 17
+$300 – child #2 under age 17
+$300 – child #3 under age 17
No rebate check for child # 4 over age 17
TOTAL REBATE = $2,100
Taxpayers with NO Federal Income Tax Liability
Example 1 : husband and wife, two children under 17, filing jointly. Total Adjusted Gross Income (AGI) of the parents is $26,000 in 2007. They earn over $3,000 a year but not enough to have any Federal tax liability. The bill provides for a tax rebate check of $600 (for married couples filing jointly).
Rebate:
$600 (married couple filing jointly)
+$300 child #1
+$300 child #2
TOTAL REBATE = $1,200
Example 2 – single mother, one child under 17 years old. She makes $12,000 a year, with no Federal tax liability. She still qualifies for a rebate also even though she doesn’t “owe” Federal income taxes or have any Federal income tax liability.
Rebate:
$300 – single/head of household for mother
+$300 child #1
TOTAL REBATE = $600
Example 3 – married couple, living only on Social Security, with no federal income tax liability, and no children under the age of 17.
Rebate:
$600 (married filing jointly)
No children eligible for rebates
TOTAL REBATE = $600