How much will I get from the stimulus plan?

John W. Schoen Senior producer • Profile • E-mail

Now that the dust has finally settled on the announcement that the government wants to spray tax rebates at consumers to get the economy humming again, the mailbox this week was full of variations on the same question: How much will I get? Like anything involving taxes and the government, the answer isn’t as simple as it should be. 

Before I get too excited about this "tax rebate," I want to know, is this an advance on next year's tax refund? Will this make me get less back on my 2008 refund, or even have to pay? Or is this a gift from my government that I can spend freely?
— Bill A., Corpus Christi, Tex.

The deal goes something like this: just about anyone who earned a paycheck in 2007 gets at least $300 back from the IRS; many will get rebates of $600 each, or $1,200 per couple. If you have children who qualify as dependents, you get another $300 for each child. If you earned at least $3,000 last year, but not enough to pay income taxes, you still get $300.

So far, so good. The rebates “phase out” for people who earned $75,000 or more and filed an individual return; the limit is $150,000 for couples who filed jointly. The phase-out clips your check by five percent of any amount over those limits. So if you’re single and earned $80,000, you’ll get: $600, minus five percent of the $5,000 you earned over the $75,000 limit ($250), which leaves you with $350. That effectively caps eligibility at $87,000 in income for singles and $174,000 for couples.

If you earned more than those limits in 2007, you get nothing. Unless you have kids, in which case you get $300 per kid. But you could lose that too if you earned enough to burn off your child credit with the 5 percent phase-out. That would happen to a married couple with one child that earned $180,000 last year; the first $24,000 over the limit would burn up their individual credits and the next $6,000 would eliminate the $300 child credit. (Still with us on this?)

Rebates for married couples are based on a joint return. So if you and your spouse together earned $95,000 and paid more than $1,200 in taxes, you’ll get a check for $1,200 for “individual” credits — even if one spouse earned a lot less than the other. If you and your spouse only paid $750 in taxes (less than the $1,200 rebate limit), you only get back $750.

Retirees are also eligible — as long as they paid taxes. So if your income came from other sources, like pensions or Social Security, you’ll get a rebate based on how much you earned and how much you paid in taxes. (If you’re living exclusively off tax-free municipal bonds, on the other hand, and you didn’t pay taxes, you don’t get a check.) For more handy examples, check out the Treasury Department’s Web site.

Keep in mind this rebate has nothing to do with the refund you may be owed from having too much withholding taken from your paycheck. The rebates won’t effect that refund. If you owe taxes, you can just give your rebate back to the government and they’ll use it to pay your bill.

The Treasury figures that something like 117 million families are in line for $103 billion worth of checks — but only if the Senate goes along with the plan worked out by the White House and the House. It’s hard to see how any Senator in an election year would block the plan.

But hey, it’s the Senate. So until you see a picture of President Bush signing the law, don’t spend the money just yet.

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