Economic Stimulus Act of 2008


Economic Stimulus Act of 2008

The Economic Stimulus Act of 2008 (USStatute|110|185|122|613|2008|02|13) is an Act of Congress providing for several kinds of economic stimulus intended to boost the United States economy in 2008 and to avert or ameliorate a recession. The stimulus package was passed by the U.S. House of Representatives on January 29, 2008, and in a slightly different version by the U.S. Senate on February 7, 2008. The Senate version was then approved in the House the same day. [cite news|title=House Follows Senate in Approving Economic Stimulus Plan|publisher=FoxNews.com|date=February 7, 2008|url=http://www.foxnews.com/story/0,2933,329565,00.html Retrieved February 14, 2008] It was signed into law by President George W. Bush on February 13, 2008. [cite news|title=Bush signs stimulus bill; rebate checks expected in May|publisher=CNN.com|date=February 13, 2008|url=http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/?iref=mpstoryview Retrieved February 14, 2008] The law provides for tax rebates to low- and middle-income U.S. taxpayers, tax incentives to stimulate business investment, and an increase in the limits imposed on mortgages eligible for purchase by government-sponsored enterprises. The total cost of this bill was projected at $152 billion for 2008 with an additional $124 billion to be spent over the next 10 years. cite web|url=http://www.govtrack.us/congress/billreport.xpd?bill=h110-5140&type=cbo |title=Budget Report: H.R. 5140: Economic Stimulus Act of 2008 |accessdate=2008-07-22 |date=2008-02-11 ]

Tax rebates

The tax rebates created by the law will be paid to individual U.S. taxpayers during 2008. Most taxpayers below the income limit will receive a rebate of at least $300 per person ($600 for married couples filing jointly). Eligible taxpayers will receive, along with their individual payment, $300 per dependent child under the age of 17. The payment will be equal to the payer's net income tax liability, but will not exceed $600 (for a single person) or $1200 (married couple filing jointly). cite web|url=http://www.govtrack.us/congress/billtext.xpd?bill=h110-5140 |title=H.R. 5140: Economic Stimulus Act of 2008 |accessdate=2008-05-14 |date=2008-01-28 ] Net liability can be found in these locations:
* Form 1040: line 57 plus line 52
* Form 1040A: line 35 plus line 32
* Form 1040EZ: line 10

Those with no net tax liability will still be eligible to receive a rebate, provided they meet minimum qualifying income of $3,000 per year. cite web|url=http://www.irs.gov/newsroom/article/0,,id=179181,00.html |title=Economic Stimulus Payment FAQs: Basic Eligibility |accessdate=2008-05-14 |date=2008-05-12 |publisher=IRS ] Rebates will be phased out for taxpayers with adjusted gross incomes greater than $75,000 ($150,000 for couples filing jointly) in 2007. For taxpayers with incomes greater than $75,000, rebates will be reduced at a rate of 5% of the income above this limit. Individuals who are claimed as dependents by another taxpayer are not eligible for the rebates.

The $3,000 of qualifying income includes earned income (e.g., wages, self-employment income, Social Security), however Supplemental Security Income does not count as qualifying income for the stimulus payment. Also, low-income workers are required to file a return to receive the payment, even if they would not be required to file for income tax purposes. [See http://usgovinfo.about.com/od/incometaxandtheirs/a/irsonrebate.htm; accessed on Feb. 18, 2008.]

Some taxpayers who exceed the income limits, but have qualifying children, will still get a rebate. For example, a single parent whose 2007 adjusted gross income was $90,000, pays more than $600 in 2007 taxes and has two qualifying children will receive a rebate of $450. The IRS adds together a $600 rebate for the parent and $600 for the two children to get $1,200, then subtracts the phaseout reduction of $750 ($50 for each $1,000 income above $75,000) to get $450. [http://turbotax.intuit.com/support/kb/tax-content/tax-tips/5462.html accessed Feb. 26.]

According to the IRS, the stimulus payment will not reduce taxpayers' 2008 refunds or increase the amount owed when filing 2008 returns. [http://www.irs.gov/newsroom/article/0,,id=179211,00.html; accessed May 4.]

The payment schedule is based on whether the taxpayer's 2007 tax return listed direct deposit information as well as the last two digits of the social security number of the tax return's main filer, with direct deposits being sent between May 2 and May 16 (the payments will be listed on the taxpayer's bank statement as "US TREASURY 220 TAX REFUND"), and paper checks being sent between May 16 and July 11. [http://www.irs.gov/irs/article/0,,id=180250,00.html accessed Mar. 19, 2008] On April 25, 2008, President Bush announced that the rebates will start going out on April 28, 2008 and the paper checks will be sent out starting on March 28th, earlier than previously announced by the IRS. [http://news.yahoo.com/s/ap/20080426/ap_on_go_pr_wh/bush_economy accessed April 26, 2008]

Taxpayers who used direct deposit for their refunds will receive the stimulus payment that same way, provided they have not done any of these things:
* Taken out a refund anticipation loan or "rapid refund";
* Used a service such as TurboTax and had the transmission fees taken out of the refund amount;
* Had their refund deposited across two accounts;
* Allowed their tax preparer (such as a CPA) to deduct their fee from the refund amount.If any of these scenarios apply, the payment will be sent as a paper check through U.S. mail.

Business tax incentives

The law offers businesses a one-time depreciation tax deduction equal to 50% of the cost of specified kinds of new investment during 2008. Qualifying investments include tangible property, such as industrial or business equipment, expected to remain in use for less than 20 years, purchased computer software, water utility property, and qualified leasehold improvements. The law also raises the limits on the value of new productive capital (machinery, equipment, and some other types of property) that businesses may exclude from their income as business expenses during 2008. Previously, the limit on expensable productive capital investments had been $128,000, reduced (but not below zero) by the amount by which the value of those investments exceeded $510,000. The law raises those limits to $250,000 and $800,000 respectively. The law does not change the requirement that expensed investments cannot exceed a business's income to be claimed as a loss.

Rationale

As 2008 began, economic indicators suggested an increased risk of recession. Federal Reserve Chairman Ben Bernanke testified before Congress that quick action was needed to stimulate the economy through targeted government spending and tax incentives. [cite news| first=Dawn| last=Kopecki| title=Bernanke Backs Calls for Quick Action|publisher=BusinessWeek| date=2008-01-17| url=http://www.businessweek.com/bwdaily/dnflash/content/jan2008/db20080117_873508.htm Retrieved February 14, 2008] Congress moved rapidly to pass such legislation. In passing the legislation, lawmakers aimed to stimulate spending by businesses and consumers during 2008. They hoped that the targeted individual tax rebates would boost consumer spending and that targeted tax incentives would boost business spending.

Lawmakers raised the limits on conforming mortgages eligible for government insurance and GSE purchase in response to the subprime mortgage crisis. This crisis had resulted in a widespread credit crunch by late 2007. The credit crunch led to a reluctance by lenders to issue so-called jumbo mortgages for the purchase of houses that exceeded the FHA and GSE limits. The United States housing bubble had pushed house prices above those limits in many areas of the country. As interest rates rose for jumbo mortgages, fewer buyers could afford them, and house prices were being forced down toward the limits for conforming mortgages. By raising those limits, lawmakers hoped to slow or halt the decline in house prices, which threatened the financial well-being of both homeowners and banks or other financial entities holding jumbo mortgages.

The FHA loan limits also went up with the stimulus package on March 6th. The loan limit package is called "FHA Forward." cite web|url=https://entp.hud.gov/idapp/html/hicostlook.cfm |title=FHA Mortgage Limits |accessdate=2008-05-14 ]

Immigration Restrictions

Taxpayers who filed their returns jointly are not eligible for payment if any of the persons on the tax return filed with an Individual Taxpayer Identification Number (ITIN) instead of a social security number. For example, if a family of five had one parent with an ITIN, no money is payable to any member of the family, including US citizens with valid social security numbers.cite news | first=Teri | last=Weaver | coauthors= John Vandiver | title=ITIN Ineligible for Special Rebate | date=2008-03-29 | publisher=Military.Com | url =http://www.military.com/news/article/itin-ineligible-for-special-rebate.html | work = | pages = | accessdate = 2008-05-14 | language = ] The rule was added after the Federation for American Immigration Reform (FAIR), lobbied the Senate for the change. [ [http://www.fairus.org/site/PageServer?pagename=research_mar08nl01?&printer_friendly=1 FAIR: American Public Rejects Tax Rebates for Illegal Aliens ] ] The amendment was proposed by Senator John Ensign of Nevada. [ [http://www.youtube.com/watch?v=qSXqiyqLVd4 YouTube - Stimulus Package Includes Illegals ] ]

As a result, many legal resident aliens and overseas military families will not receive any payment. US citizens who will not receive payments include those who file a joint tax return for 2007 and include an individual taxpayer identification number, or ITIN, on the document. In this case the entire family will be ineligible for the economic stimulus rebate President Bush announced earlier this year.cite news | first=Teri | last=Weaver | coauthors= John Vandiver | title=Joint tax returns using ITIN ineligible for special rebate | date= | publisher= | url =http://www.stripes.com/article.asp?section=104&article=61043&archive=true | work = | pages = | accessdate = 2008-05-14 | language = ] US citizens may amend their tax returns to file separately, but in most cases this results in a lower deduction for dependents, thereby canceling any benefit from the stimulus payment. In many cases, it is better to forgo the stimulus payment than to file an amended tax return.cite news | first=Karen | last=Jowers | coauthors= | title=Some married troops cannot get rebate checks | date=2008-04-12 | publisher= | url =http://www.armytimes.com/news/2008/04/army_rebate_041408w/ | work =Army Times | pages = | accessdate = 2008-05-14 | language = ] At least one million legal residents and tens of thousands of troops were affected by the law, which was designed to keep illegal immigrants from getting stimulus checks. [cite news| first=Ken| last=McLaughlin| title=For some U.S. troops, economic stimulus check is not in mail REBATE BYPASSES THOSE WITH FOREIGN SPOUSES|publisher=San Jose Mercury News| date=2008-05-08| url=http://www.mercurynews.com/ci_9191044 Retrieved May 8, 2008]

References

External links

* [http://www.irs.gov/app/espc/ Economic Stimulus Payment Calculator]
* [http://www.govtrack.us/congress/billtext.xpd?bill=h110-5140 The text of the act]
* [http://www.irs.gov/newsroom/article/0,,id=179181,00.html Stimulus Payments: Answers to Frequently Asked Questions]
* [http://blog.usa.gov/roller/govgab/entry/unclaimed_economic_stimulus_payments Unclaimed Economic Stimulus Payments] , "GovGab", U.S. government blog, August 4, 2008


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