SPECIAL: Economic Stimulus Bill Awaits President’s Signature

Economic Stimulus Bill Awaits President’s Signature
Passes House and Senate Same Day

In an unprecedented move, the House of Representatives passed the same legislation as one that passed the Senate within hours of the Senate’s vote on Thursday, February 7.

A summary of the $170 billion economic stimulus bill:
* $600 per person with adjusted gross income between $3,000 and $75,000 plus $300 per child
* Couples earning up to $150,000 in 2007 will receive $1,200.
* Tax filers who do not owe income taxes because of various credits and deductions but have at least $3,000 in income in 2007- which can include Social Security and disability payments - will get $300 rebates per person or $600 per couple.

An example: A couple with one child and $100,000 in AGI will get a rebate of $1,500 ($1,200 + $300). If they have two children, they will get $1,800 ($1,200 + $600).

If you make more than the limits above, you may be eligible for a partial refund.

Not included in this legislation:
* Extension of employment benefits
* Checks for people aided by the food stamp program and the low-income home energy assistance program

The Senate bill also fixed a “glitch” that would have allowed illegal immigrants to receive checks.

The IRS will handle the “rebate checks” after the bulk of the tax season. Most news reports estimate that first checks will be mailed in May. You must file a federal tax return for 2007 to be eligible for these rebate checks. “Some people are normally not required to file a return,” says CNN. “To get the rebate, however, they have to file a federal return.”

The checks are an advance on next year's refunds, and most, if not all of the money, will be deducted from taxpayers' refunds next tax season, says CNBC. CNN states, “Your rebate is a one-time tax cut - an advance on a credit you'll receive on your 2008 return.” As I haven’t seen the actual legislation (and even if I did, it doesn’t mean I can understand it), I don’t know what the effect of the rebate is on next year’s taxes.

Nearly half (46 percent) of Americans said they plan to use the rebate to pay off debt and a quarter (28 percent) would save the money, according to the International Council of Shopping Centers and UBS Securities, which jointly commissioned the study of 1,005 households between January 31 and Sunday.

Some are using the bills’ new housing provisions to buy their next home or to refinance. The bill temporarily raises conforming mortgage loan limits from $417,000 to as high as $729,750 in areas such as California. People with homes between these figures who currently have jumbo loans are looking to refinance to the cheaper conforming loans. Conforming loans are mortgages that can be sold to Fannie Mae or Freddie Mac in the secondary market and carry interest rates of up to 1% less than jumbo loans.

There is also a similar change for loans backed by the Federal Housing Administration, a government agency that insures loans to borrowers with poor credit. They would be able to back $10 billion in additional loan guarantees with higher limits through 2008.

The impact of the Federal Housing Administration change is likely to be smaller. The Congressional Budget Office estimated the agency could back $10 billion in additional loan guarantees through 2008 with higher limits - a tiny fraction of the more than $2 trillion in new mortgage loans made last year.

Written and Edited by Wayne W. Chang with information from CNN.com, CBS Radio, CNBC, and the Associated Pres as of 11pm PT, February 8, 2008. Revised February 10.


The following text comes from an “eNews” from HR Block released February 8, 2008:

Economic Stimulus Act of 2008 (HR 5140)

Congress has passed the Economic Stimulus Act of 2008 and it is expected that the President will sign the bill to law shortly. The major provision of the Act is the advance refund or “rebate” provision. Treasury Secretary Henry Paulson has indicated that the IRS will begin preparations for processing rebate checks immediately and the checks will be issued starting in May.

RECOVERY REBATES

Amount of Rebate
* $600 ($1,200 for joint returns), or
* Net income tax liability, if lower, but not less than $300 ($600 for joint returns)
* Rebate increased by $300 for each qualifying child (generally, a child that qualifies for the child tax credit)
* Fully refundable

Eligible Individuals:
* Must have either
(1) Qualifying Income of at least $3,000 - Qualifying income is defined as earned income, social security benefits and/or disability benefits paid to veterans and surviving spouses, or
(2) Net income tax liability of at least $1 and gross income that is more than the applicable standard deduction + 1 exemption amount (2 exemptions for MFJ) - Generally, net income tax liability is the regular tax + AMT (if any) less allowable credits other than the child tax credit and refundable credits, such as EIC
* Does not apply to nonresident aliens, individuals who could be claimed as dependents, individuals who do not have valid SSNs, and estates and trusts.

Phaseout:
* Reduced by 5% of AGI over $75,000 ($150,000 for joint returns)
* Thus for taxpayers without children, maximum rebate is fully phased out at $87,000 ($174,000 for joint returns)

Timing and reconciliation:
* Generally, based on 2007 return
* Checks ASAP; no later than 12/31/08 (expected to start in May)
* Actual credit to be calculated on 2008 return
* Taxpayer will receive any additional credit due
* Excess credit will not have to be repaid

BUSINESS PROVSIONS
* Section 179 deduction increased to $250,000 (phaseout to start at $800,000) for 2008
* 2008 amounts would have been $128,000 and $510,000 respectively
* 50% bonus depreciation for property placed in service in 2008
* Both provisions apply to 2008 only