I've read conflicting stories on the rebates, one said I will have to pay the entire rebate of $600 back in reduced tax refund or an actual increase in my taxes by the whole amount, on my 09 return (MSN money article) - another said I will only have to pay TAX on the $600 as it would increase my income by that amount. What's the correct answer? Thanks!
"frenchy" wrote
Federal tax refunds are not taxable income on federal returns. Although Congress could change it for this rebate.
Other than that, remember that this gimmick ~has~ to be paid for by someone at some time. They aren't overflowing with money in DC, so this'll just add to the deficit (ie: money collected being less than money spent). If not paid for directly on the 2008 tax returns in some manner, expect increasing taxes (increase in tax rates, decrease in deductions/exemptions, or both) in the future years.
Ya can't have it all and have others pay for it all.
So that old commercial saying "You can pay me now, or you can pay me later" applies here - you're going to pay later for what you get today.
It's a refundable credit toward 2008 taxes. In effect it reduces your 2008 tax liability by the rebate amount, and if the rebate winds up being more than your 2008 tax, you get to keep the change.
You ignore the rebate through the year. Don't adjust your withholding or estimated tax payments, and you'll wind up with about the same refund/balance due when you file your 2008 return as you would have without the rebate. Of course, you will have had the rebate check previously.
If you wind up not getting a rebate check you'll get the credit when you file your 2008 return.
The bill has finally passed both branches of congress, and signed by the president.
See
You understand, although I'd use different words. The "rebate" is a refundable credit on your 2008 taxes. "Refundable" means you get it even if it reduces your tax below zero.
The checks to be sent out in 2008 are an estimation, based on your 2007 return, of what your 2008 credit will be.
Change "might" to "will," and you got it.
That is correct. When you file your 2008 return in 2009 the credit applies to your return. It is reduced by the amount of the advance check you got, BUT NOT BELOW ZERO. That means you keep the change.
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