More Answers to Your Questions about Tax Rebates

Jan. 27, 2008— -- On Friday, we invited "World News with Charles Gibson" viewers to submit any additional questions about tax rebates in the economic stimulus plan. We read through your online submissions, and ABCNews.com personal finance columnist David McPherson responded to some of our viewers' pressing questions about tax rebates.

Thank you for participating in our online discussion.

What If I'm a Retiree on Social Security?

Question: "Will tax rebates be given to retirees on Social Security who are not working? Will there be income parameters? Thank you."Carrie from Bradenton, Fla.

McPherson: Carrie, retirees will be eligible to the extent they owe federal income taxes on Social Security, investments, pensions and other income sources. Social Security benefits do not qualify as earned income, but Social Security payments are taxable above certain income levels.

What If My Spouse's Income Is Tax Free?

Question: "My husband is in the military and he is stationed in combat zone therefore all of his income is tax free. My question is this, how will that affect our tax rebate if our income tax return only shows my income? And by the way, we have three children."Misty from Ridgecrest, CA

McPherson: Misty, there are a couple issues to consider in your case. First, if your earned income from a job or business -- apart from your husband's combat pay -- was at least $3,000 last year, then you would qualify for $300 rebates for each of member of your family: you, your husband and your three children.

Even if you yourself did not have earned income of at least $3,000, your family still may qualify under your husband's combat pay. Even though combat pay is nontaxable, you can elect to have it considered earned income for the purposes of the earned income tax credit.

Tax-free combat pay also is considered earned income for the purposes of contributing to an IRA. These factors lead me to believe there's a good chance combat pay may be counted as earned income for the purposes of the tax rebates.

But stay tuned. As with all questions, the final details will depend upon what Congress and President Bush do. For more information, you may want to consult IRS Publication 3, Armed Forces Tax Guide, which is available at www.irs.gov.

What If I File Head of Household?

Question: "How does this affect people who file head of household? Are they considered single taxpayer?"Darlene from Atlanta, Ga.

McPherson: Darlene, the head of household is treated as a single individual eligible for one rebate plus rebates for any children. The minimum rebate for an individual with at least $3,000 in earned income is $300, but it can be as high as $600, depending upon how much that person owes in federal income tax.

Question: "How does the rebate work for a married couple filing jointly with only one person working?"Frank from Lewiston, Penn.

McPherson: Frank, the rebate amount will depend on the couple's joint income, regardless of whether one or both work.

What if I Didn't Owe Taxes This Year?

Question: "I am so confused about the package. I am a single mom who runs a very small childcare service. I only cleared $8000 for the year and even though paid out money to my social security and Medicare it came out in my tax return to get back what i would pay in federal taxes so i ended up not owing anything in taxes does that mean i don't qualify for the tax rebate??"Marykathryn from Tobyhanna Penn.

McPherson: Mary, since your earned income exceeded $8,000, you would be eligible for at least a $300 rebate for yourself plus $300 for each child.

But I wouldn't spend the money yet. Nothing is final, and with the way Washington works, everything could still change. Stay tuned.

What If I'm a College Student Working Part-Time?

Question: "I am a 21 year-old Rutgers University student and professional EMT. I made a little over $13,000 working part time during college. The burning question I have, along with countless other college students is: Is the rebate available to non-home owners who paid taxes in 2007, such as a college student??"Matt from Roselle Park, NJ

McPherson: Matt, as it stands now, it is likely you would qualify for at least the minimum $300 rebate since you had earned income in excess of $3,000. If you owed federal taxes in excess of $300, you would be eligible for a larger rebate up to the $600 maximum. Home ownership is not a factor in determining eligibility.

Just remember that everything is subject to change until Congress takes final action and President Bush signs the bill. My answers are based on a political agreement released by the House and the White House. Many details remain to be filled in.

What if My Child Receives Social Security?Question:"My 17 year old son receives $970 a month from social security. Will he receive a rebate check?"Steve from Philadelphia, Penn.

McPherson: Steve, your son would not be eligible if received no earned income from a job and paid no federal income taxes.

What if My Child Filed Taxes?

Question: "I have a 16 year old daughter that earned 5,000. She filed her taxes. Will she get a check also?"Ann from San Antonio, Tex.

McPherson: Ann, it would appear your daughter may be eligible for at least a $300 rebate since her earned income exceeded $3,000 and she filed a tax return. My only hesitation is her age. For the purposes of the child tax credit, a qualifying child must be under age 17 at the end of 2007. The rebate details released to date do not specify whether in the case of a child with earned income whether the child or parents or both would receive the rebate. I can't say for sure.

What if I'm a Working Dependent?

Question: "I am 20 years old and I am working part time and going to school full time. I am still under my parents medical and living in their house. Would I get a refund check?"David from Philadelphia, Penn.

McPherson: David, your eligibility for a tax rebate will depend upon how much you earn and whether you pay federal income taxes. If you made at least $3,000 from your part-time work last year, you would qualify for the $300 minimum. The rebate would be higher if you owed more than $300 in federal income taxes for 2007.

Treasury Secretary Henry M. Paulson fielded a similar question yesterday in an online chat. View a portion of that question and answer below:

Dedric, from South Carolina writes: "I am an 18 year old college student, but i have also made more than $15000 in 2007. I was wondering how will this stimulus package affect me."

Henry M. Paulson: Under the agreement we worked out with the House of Representatives, assuming at least $3,000 of your earnings are from taxable wages, salaries, tips or earnings from self-employment, you?d qualify for the minimum $300 rebate. If your tax liability is greater than $300, you would get the greater amount (up to a maximum $600).

Question: "Do you still qualify for the tax rebate if you are claimed by your parents? I am a college student, employed at the local hospital, and I do pay taxes, but when it comes time to file I am a dependent. Will I be left out of the extra rebate?"Lily from Arkansas

McPherson: Lily, the agreement details released so far do not spell out how a child will be defined for the purposes of this rebate. But under federal tax rules, a dependent and a child are not necessarily the same thing. Based on the answer Secretary Paulson gave to the question I cited above, I would think you would qualify if pay federal income taxes.

Does My Child Qualify for the $300 Rebate?

Question: "Regarding the $300 per child rebate: will a parent get the rebate for a child who is a dependent, but doesn't qualify for the child tax credit?"Leslie from Hobart, Ind.

McPherson: Leslie, as I mentioned above, the details released so far do not specify the cutoff age for a child with respect to the proposed rebates. But for the purposes of the existing child tax credit, a qualifying child is someone 16 or younger as of the end of the tax year.

I'd suggest you keep your eye out for more details. More information will be forthcoming once the final bill is passed and signed by the president.

How Many Children Qualify for the Rebate?

Question: "what about families with 5 children do they get the rebate for each child?"Irene from Seguin, Tex.

McPherson: Irene, that's a good question and one I've wondered about. I have seen no mention of any limit on the number of children that would qualify for the rebates. However, I can tell you there is no limit on the number of children that qualify for the existing child tax credit.

How Are Elder Dependents Counted?

Question: "I claim my mom on my income tax as a dependent. Does that mean I will get money for her?"Jennifer from Everett, Mass.

McPherson: Jennifer, for tax purposes, a child and a dependent are not the same thing. A dependent falls within a broader category that includes relatives to whom you provide at least half of their financial support. This can include a parent or a college-age student. I can't say for sure whether you will receive a rebate for your mother, but I tend to doubt it.

How Will This Affect My Tax Refund Next Year?

Question: "Have I understood this wrong? Is the tax rebate in all actuality an advance on our refunds next year? Does it mean that if we spend this money now that we won't get the money back next year?"Colleen in Liberty, Miss.

McPherson: Colleen, it is unclear to me exactly what the impact will be on our 2008 tax returns, but clearly there will be some effect. I can tell the proposal as outlined so far calls for the rebates to result from a cut in 2008 taxes even though the rebates will be based on 2007 tax figures.

The proposal calls for the existing 10 percent tax rate on the first $6,000 in income for a single person and the first $12,000 for couple to be cut to 0 percent for 2008.

In 2001, when there was a similar tax rebate, taxpayers received checks between July and October. If the check received by a taxpayer exceeded the amount of credit a taxpayer qualified for, then the taxpayer was permitted to keep the excess, according to the Congressional Joint Committee on Taxation.

What If I Am Unemployed?

Question: "I lost my job in 2007 and I am currently on unemployment. How will the tax rebates affect me?" Harriet from Houston, Tex.

McPherson: Harriet, you would be eligible to receive a rebate if you owe federal income taxes for 2007 or if you earned at least $3,000 from your job before losing it. Unemployment benefits do not qualify as earned income, but they are subject to federal income taxes and so you could still end up owing taxes for 2007.

What If I Don't File Income Tax?

Question: "How does the tax rebate apply to people that don't file income tax? If they are going by 2007 returns and there is no return for certain people will they still get a rebate and how much?"Charlotte from Painted Post, NY

McPherson: My understanding is that you will not receive a rebate if you do not file a 2007 tax return for whatever reason. My suggestion is if you want the rebate, then file a return.

What If I Am Divorced?

Question: "My husband and I are separated. How will the tax rebate for us? Will it come in one check or be split between us?"Cindy from Danielson, Conn.

McPherson: Cindy, it will depend on what type of tax return you file for 2007. If you file jointly, one check would be sent. You do have the option of filing your own return using the married filing separate status. In that case, you would receive your own check if eligible.

How Does the Government Determine if I'm Eligible?

Question: "Is income level based on adjusted gross income or taxable income?" Dale from La Grange, Ky.

McPherson: Dale, adjusted gross income is the measure used to determine eligibility. AGI is the figure listed at the bottom of the first page of a federal tax return. Also, for low income taxpayers who owe no federal income, the key measure will be earned income, which generally is income earned from a job or business.

What If I Don't Want a Tax Rebate?

Question: "If we don't want to receive the current rebate proposal (so that it doesn't effect this year or next year's tax return... i.e make it smaller than we expect or larger than we expect) can we elect out?"Lorraine from Chesapeake, Va.

McPherson: Lorraine, you will have to wait to see what rules the IRS develops to handle distribution of the rebates. After the tax rebate plan passes Congress and receives President Bush's signature, I would visit the IRS web site, www.irs.gov, for more information.