You didn’t think the government was going to give us $600 each, did you? Not hardly. Instead, the amount credited to your 2007 taxes will be added on to your 2008 taxes. Or some weaselly variant thereof.
The [unusually complicated, intelligible only to tax lawyers]wording of the bill appears to indicate that if, for example, you qualified for a $1,200 rebate based on 2007, but in 2008 you earned more income and your credit got phased out because of AGI limitations, you would owe that money back. Ouch!
“the amount credited to your 2007 taxes will be added on to your 2008 taxes.”
That’s not exactly it. Most individual taxpayers WILL get a tax credit in 2008. The way it works is, you’ll get a rebate in 2007 figured as if the tax credit rules applied to your 2007 tax return. This is considered an advance refund against the tax credit for 2008. But if your income changes between 2007 and 2008, so that it’s either too high or too low for the amount of rebate you received, it does appear that you would have to pay back the difference on your 2008 taxes. For most wage earners, this won’t be an issue. But if you’re self employed, or get laid off, it could be a problem.
BTW, since it’s based on your 2007 taxes, and refunds are expected to begin in June, that means delaying your filing (by filing an extension) will delay your rebate– so get your stuff to your tax man!
Bob- The shell game photo is the perfect motif for this piece. It feels like a massive bribe to me. Dirty, dirty. Hey let’s give everyone $600 that ought to shut them up for awhile.
As I posted on my blog this morning, I stand corrected: CCH (tax experts) say you WON’T have to pay back any excess rebatre. I sure can;t find that inj the bill, but presumably they read these things better than I.
But yeah, it’s a $170 billion bribe by incumbent lawmakers. Two different surveys report that 4 out of 5 taxpayers plan to pay down debt or invest– not spend– the rebate. Some stimulus.
If most the money will go to debt, gee, the credit card companies will be happy, won’t they?
Actually I doubt it. Credit card companies make money when people maintain a balance– not when they pay it down. Many Americans run high credit card balances, make their monthly payments on time, and pay exhorbitant interest expense in the process. The banks love them. Pay down the debt? That’s unAmerican– just ask the President.
Keep in mind, too that when someone defaults, the banks accrue enormous amounts of income in the form of late fees, collection fees, and so forth. Then later they get to write it off as bad debt, so it inflates their income without becoming taxable. What a deal! Gross income goes up (wowing investors) but taxes don’t.