Economic Stimulus Act of 2008

Recovery Rebates

Eligible individuals will begin receiving rebate checks sometime soon after the April 15 tax filing deadline. The rebate checks are not a refund of 2007 taxes, but an advance reduction in 2008 taxes being given in 2008. The rebate check will be based on 2007 tax information.

If you do not qualify for the rebate check now based on your 2007 tax return information, but your situation changes and you do qualify in 2008, then you will get the rebate when filing your 2008 tax return. However, if you receive the refund check now, but don’t qualify for it at the time that your 2008 tax return is filed, you will not need to return the money.

How does a taxpayer qualify for the rebate check? The legislation provisions include the following:

Individual tax rebates of $600 ($1,200 for married filing joint) OR if the taxpayer’s total tax liability is less than $600 ($1,200 married filing joint), but more than $300 ($600 filing joint), then the rebate check amount will be the amount of their tax liability.

Individual tax rebates of $300 ($600 for married filing joint) of the taxpayer’s tax liability if either:

(a) the taxpayer's qualifying income is at least $3,000 (qualifying income is earned income generally, veterans' disability payments [including payments to survivors of disabled veterans] and social security benefits); or

(b) the taxpayer’s net income tax liability is at least $1 and gross income is greater than the sum of the applicable basic standard deduction amount and one personal exemption (two personal exemptions for a joint return).

In addition, the rebate for taxpayers with dependent children will be increased by $300 per qualifying child.

The rebate phases out at a rate of 5% of Adjusted Gross Income over $75,000 ($150,000 for married joint filers).

Mailing Schedule

Stimulus payments will be sent out in the order of the last two digits of the Social Security number used on the tax return. On a jointly filed return, the first Social Security number listed will determine the mail-out time.

Taxpayers who choose direct deposit on their federal income tax returns can expect to receive their economic stimulus payments between May 2 and May 16 provided their returns were received and processed by April 15, 2008.

For taxpayers who did not choose direct deposit on their tax return but whose returns were processed by April 15, paper checks will be in the mail starting May 16. They will be sent in batches over a nine-week period with the initial mailings completed by around July 11.

Online Calculator

IRS has announced the availability of an online calculator to help taxpayers determine if they are eligible to receive an economic stimulus payment and if they are, how much they can expect (see http://www.irs.gov/app/espc/ ). Anyone who has prepared a 2007 income tax return can use the calculator. It will ask taxpayers a series of questions, so they should have their 2007 tax returns handy. After answering the questions, the calculator provides the projected dollar value of the payment.

Incentives for Business Investment

Section 179 deduction is increased for one year to $250,000 for tax years beginning in 2008 with an overall investment limit of $800,000.

Bonus first-year depreciation at 50% is back for property acquired after December 31, 2007 and before January 1, 2009:

1) tangible property with a recovery period of 20 years or less,

2) computer software purchased by the business,

3) water utility property, and

4) qualified leasehold improvement property.

In addition, the luxury auto cap on first year depreciation has increased by $8,000 for vehicles that qualify.

Please consult us to find out exactly how the Economic Stimulus Act of 2008 will affect your personal and business taxes in 2008. Contact your local Yeo & Yeo office.