Qualifying Income for Tax Rebates
Some Low Income Workers Eligible for Economic Stimulus Payments
Learn what type of income counts and how much must be reported to qualify for a 2008 tax rebate.
To be eligible for a tax rebate, individuals must fall within a certain income range and file a 2007 tax return (Form 1040 or Form 1040A). Generally speaking, those who pay income tax, but don’t make high incomes are eligible for tax rebates. Additionally, individuals who do not make enough income to pay taxes qualify for tax rebates (also known as an economic stimulus payments) if they can show a minimum of $3,000 of qualifying income for 2007.
In order to help people meet the $3,000 threshold, the IRS will count certain types of non-taxable income toward the limit. Low income workers as well as recipients of Social Security benefits, certain railroad retirement benefits, and payments from the Department of Veterans Affairs may report income from those sources in order to help them reach the minimum qualifying income threshold. This means some individuals and families who don’t otherwise need to file a 2007 tax return must do so in order to receive a tax rebate check.
Definition of Qualifying Income for Economic Stimulus Payments
The IRS uses the term “qualifying income” in many of its press releases, but many people don’t know what this term actually means. For purposes of the 2008 tax rebate, “qualifying income” refers to any income that counts toward a person’s eligibility for the rebate.
What Constitutes Qualifying Income
For purposes of tax rebate calculations, qualifying 2007 income includes the following:
- Earned income (like wages, tips, net self-employment income)
- Social Security benefits
- Certain railroad retirement benefits
- Veterans’ disability, pension, or survivors’ benefits received from the Dept. of Veterans Affairs
- Non-taxable combat pay
The following is specifically not considered qualifying income for purposes of tax rebates:
- Supplemental Security Income (SSI)
- Dividend income
- Interest income
- Capital gains
- Non-veterans and non-Social Security pension income (for example, income from an IRA)
The Social Security benefits above would have been reported on a 2007 Form 1099-SSA, and the railroad retirement benefits would have been reported on 2007 Form 1099-RRB. If an individual never received Form 1099-SSA or Form 1099-RRB, the IRS will accept an estimate. To compute this, multiply the monthly amount received in 2007 by the number of months a check was received.
Special Instructions for 2007 Tax Returns
Individuals should note that Form 1040, Line 20a and Form 1040, Line 14a are typically used to report Social Security, but for 2007 they should also be used to report railroad and veterans’ benefits in order to claim a tax rebate. To assist taxpayers who only need to file to report qualifying, but non-taxable income, the IRS has issued a sample 1040A that highlights the exact lines to fill out. This sample can be downloaded from the IRS website.
Tax Return Mistakes Are Fixable
Individuals who already filed a tax return, only to later realize that they should have reported more income in order to qualify for a tax rebate, needn’t worry. If the return showed less than $3,000 of income, but the individual had enough qualifying income in 2007 to meet the $3,000 threshold, they need to file Form 1040X, Amended U.S. Individual Income Tax Return, to amend the amount reported.
Source: IRS Website
