By:

Joan Martin, Grayson Co. Extension

Agent for Family & Consumer Sciences

By:

Joan Martin, Grayson Co. Extension

Agent for Family & Consumer Sciences

I am really looking forward to receiving the economic stimulus payment.

There has been some confusing information about how to estimate the size of the payment.

The most commonly heard statement is that the refund will be $600 per individual plus $300 if you have a qualifying child.

This information is not quite accurate so please read the explanation below.

Essentially, there are two parts to the stimulus payment: a basic amount based on tax liability, filing status or other qualifying factors if there is no tax liability and an additional amount based on whether a qualifying child is reported on the return.

Taxpayers who had a net income tax liability will receive a payment, unless they can be claimed as dependents on someone else‚s return, are high-income individuals or do not have a valid Social Security Number.

The payment is equal to the taxpayer‚s net income tax liability, but no more than $600 for a single person or $1,200 for a married couple filing a joint return.

The minimum payment is $300 for a single person or $600 for a married couple filing jointly.

People with no net income tax liability will usually get a minimum payment of $300 for a single person or $600 for a married couple filing jointly, as long as they have qualifying income of at least $3,000.

To figure your qualifying income, add together the following amounts:

Wages that are reported on Form W-2.

Net self-employment income.

Social Security benefits reported in box 5 of the 2007 Form 1099-SSA, which would have been received in January 2008.

Certain Railroad Retirement benefits reported in box 5 of the 2007 Form 1099-RRB, which recipients would have received in January 2008.

Veterans‚ benefits received in 2007, including veterans‚ disability compensation.

Nontaxable combat pay if the taxpayer elects to include it as earned income.

There is extra money if the individual has a qualifying child.

Eligible taxpayers who qualify for a payment may receive an additional $300 for each qualifying child.

To qualify a child must be under age 17.

The stimulus payment ˆˆ both the basic component and the additional funds for qualifying children ˆˆ begins to phase out for individuals with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000.

The combined payment is reduced by 5 percent of the income above the AGI thresholds.

Here are two examples of how the phase out works:

An individual with AGI of $80,000 and federal income tax liability in excess of $600 would qualify for a basic rebate of $600.

Because this individual‚s AGI exceeds $75,000, however, the rebate is reduced by $250 (the credit is reduced by multiplying the amount of AGI over $75,000 by 5%).

The taxpayer receives an economic stimulus payment of $350.

A married couple with two children, AGI of $160,000 and federal income tax liability exceeding $1,200 (before the child tax credit) initially qualifies for a basic rebate of $1,200 and an additional qualifying child credit of $600 for a total rebate of $1,800.

But because the couple‚s AGI exceeds $150,000, their rebate is reduced by $500 (the amount of AGI over $150,000 multiplied by 5%).

The couple receives an economic stimulus payment of $1,300.

I hope this gives you a better understanding of what to expect when you receive the economic stimulus payment.

Not everyone will get $600 plus $300 for each qualified child.

Next week I will write about some of the choices you can make for spending or saving the payment.