The tax rebates: Questions answered

By: | Opelika Auburn News
Published: February 10, 2008

AMY DOMINELLO | Media General News Service

WASHINGTON — Congress passed an economic stimulus package this week to send Americans extra spending money.

President Bush is expected to sign the legislation soon, and checks could arrive as soon as May.

Here’s the lowdown on the rebates:

How much will I get?

It depends.
An individual who paid taxes in 2007 with an adjusted gross income of less than $75,000 will get up to $600. Couples with incomes of less than $150,000 will get up to $1,200. The rebates go down $50 for every $1,000 over the income limits.
Got kids? You’ll receive an extra $300 for each little tyke.

What if I didn’t pay taxes in 2007?

You could still receive a rebate. Individuals with an earned income of at least $3,000 in 2007 will receive $300; couples will receive $600. Those who draw Social Security or veterans’ disability benefits could also get a rebate.

I’ve got my eye on a shiny new iPod. Good choice?

First off, wait until you have the check in your hand.
Before rushing to the store, financial advisers suggest paying off debt first.
“It’s not that fun,” concedes Scott Cole, an investment adviser for Cole Financial Planning in Bessemer, Ala. “You don’t often get $1,000 or $1,500 in the mail.”
If you don’t have debt, use it to start an emergency fund. If you have a healthy emergency fund, think about your future and the best way to save or invest your money.
If you’ve done all those things, treat yourself. Just don’t go crazy.

Will rebates help the economy?

If people spend the money, it could slow down a recession, economists and financial experts said.
But if people pay off bills or save the money, it will do little to help the economy.
In 2001, smaller rebates did boost the economy a bit. But experts worry that rebates are a short-term fix that we’ll pay for down the line — with additional deficit spending or future taxes.
“There’s a cost here that a lot of people are ignoring,” said Janice Caudill, a finance instructor at Auburn University.

Amy Dominello can be reached at adominello@mediageneral.com or 202-662-7671.