How to treat the 2007 Economic Stimulus Rebate on your 2008 Income Tax Return

This is the old Stimulus package, and not the new one that is still in the works.  Many might not know how to treat the 2007 Economic Stimulus rebate check that you received in 2008  on your 2008 Income tax return, or how it is affecting your 2008 Income tax return; this post might answer some of the questions that you may have.  This is from Tax Talk by Don Farmer CPA, P.A. Seminars.

The Economic Stimulus Act of 2008 was signed into law by (former) President Bush on February 13, 2008.  The new law provides credits for individuals to either be paid as a rebate during 2007 or to be taken as a tax reduction on 2008 income tax returns.

Form 1040, second page,  Line 70.  Click here to see instruction on pages 62-63.


REBATE CREDIT, effective for tax years beginning in 2008.  The Act provides for credits against the 2008 Federal income tax liabilities of certain qualifying individuals.  However, the credit is to be calculated by the IRS based upon each qualifying individual’s 2007 income tax return and rebated to the individual.  When, the individual prepares his  or her 2008 income tax return, the credit is calculated on the 2008 return and reduced by any rebate received. Therefore, if the credit on the 2008 return is greater than the rebate received, the additional credit is taken on the 2008 return.  However, if the rebate was greater than the credit calculated on the 2008 return, the individual is not required to repay the excess. Because the credit allowed by the 2008 Act may be a rebate, a credit on the 2008 return, or both, we refer to the credit as a rebate credit.

Note! Since the rebate is calculated based upon the 2007 return information, the rebate cannot be calculated until the 2007 return is filed.  In addition, no rebates will be made after December 31, 2008.  Also, rebates may be offset by back taxes, past-due child support, federal student loans, etc.  No interest will be paid on the rebate amounts.

One half of any rebate issued with respect to a 2007 joint return is deemed to be issued to each individual.  Thus, if taxpayers filed a joint return for 2007 and received a rebate, but were divorced or filed separate returns for 2008, each individual will take into account half of the rebate when reducing the credit allowed for 2008.

Individuals that do not quality, if another person is “allowed” to claim you as a personal exemption deduction.  In addition, nonresident alien individuals generally do not qualify for the rebate credit.

Qualifying individuals receive a basic rebate credit equal to the greater of:

  • Net tax liability up to $600 ($1,200 on a joint return), or
  • $300 ($600 on a joint return) if the individual has either 1) at least $3,000 of “qualifying income” or 2) net income tax liability of at least $1 and gross income greater than $8,950 for singles, $17,900 for joint filers, $8,950 for married individuals filing separately, and $11,500 for a head of household.
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You Must File a 2007 Federal Income Tax Return to get your Stimulus Payment

Congress recently passed the Economic Stimulus Act of 2008, which President Bush signed on Feb. 13, 2008. If you normally file your income tax return, then there is nothing that you need to do, but for those that don’t normally file, especially our elders that receive social security payments, to be able to receive this payment of $600 they must file a 2007 Federal Income Tax Return. Most people will not know this, and If you know of anyone that would qualify, please pass this information to them. Below is information from

Even if you aren’t normally required to file a federal income tax return, you must file one if you want to be among the 130 million individuals who will receive a check from Treasury beginning in May of this year. The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payment.

In most cases, payments will range from $300 to $600 for individuals and $600 to $1200 for joint filers. Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child (subject to income phase-outs).

“We want to make sure everyone who is eligible for these payments receives them,” says IRS Executive Julie Rushin. “Most eligible taxpayers do not need to take any extra steps to receive the payment. All they have to do is file a 2007 federal tax return and the IRS will automatically do the rest. No other action, extra form or call is necessary.”

You Must Have a Valid Social Security Number

Taxpayers must have a valid Social Security Number to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. Children must be eligible under the Child Tax Credit and must also have a valid Social Security Number to be eligible as qualifying children.

You Must File a 2007 Federal Income Tax Return, Even if You Normally Would Not

Low-income workers who had at least $3,000 in earned income (such as wages) and other qualifying income in 2007 but do not otherwise earn enough to be required to file a federal tax return need to file a return to qualify for the stimulus payment. Other qualifying income includes Social Security benefits, certain Railroad Retirement benefits, or certain veterans’ benefits.

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