Recovery Rebates on their way IF you file a 2007 tax return

If and when you file an income tax return for 2007, the US Treasury will be able to send you your Recovery Rebate check, if you qualify.

These rebates will work in much the same way as the increased child tax credit did a few years back. The 2007 tax returns are being used to determine who qualifies, and is therefore sent, a rebate check. Next year’s Form 1040 for 2008 will include a calculation to see how much of a rebate you should have received. If you didn’t get it all this year, you’ll get the balance when you file your 2008 income tax return. If you don’t qualify when doing the calculations on your 2008 return, don’t worry…you won’t have to pay it back.

All rebates have to be mailed out during 2008; if you don’t file a 2007 tax return, you can get your rebate on your 2008 income tax return filing.

Who qualifies? Anyone who files a tax return and pays income tax in 2007, or if not paying income tax, has earned at least $3,000, will qualify for the rebates. If you have more than $75,000 of adjusted gross income per taxpayer on a return, (two taxpayers with $150,000 on a married, filing jointly tax return) the rebates will be phased out by 5 cents for every dollar above that limit.

For example, say you are married with three children and you have adjusted gross income well over the $150,000 limit. Do you qualify? Take the initial rebate calculation of $1,200 for the married, filing joint return plus $300 per child or $2,100 total potential rebate (1200+300+300+300). Divide $2,100 by 5%, which is $42,000. You can have up to almost $192,000 adjusted gross income ($150,000+42,000) before you lose the benefit of the recovery rebate. I say almost because in order to preserve $1 of the recovery rebate, you need to be $20 less than that upper limit. So if you earned $191,080, you would keep $1 of the Recovery Rebate.