The Rebate: What’s in It for You

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On Feb. 13, President George W. Bush signed a bill, the “Economic Stimulus Act of 2008,” designed to put money into the pockets of millions of consumers, provide tax breaks to businesses and alleviate some of the problems in the home-mortgage industry—all with a view toward jump-starting the ailing economy. Here’s how the plan will probably affect you.

Rebates for (almost) everyone. Most American families who file taxes in 2007 are going to get checks with varied amounts, according to their income and the number of children (under the age of 17) in the family. Single workers will receive up to $600; joint filers get up to $1,200. Households with kids obtain an additional $300 per child. However, if your adjusted gross income is above $75,000 and you’re single, or above $150,000 and you’re married, the amount of your rebate will decline by $50 for every $1,000 you earn above these limits. In short, a lot of Americans are going to receive a rebate. The Bush administration estimates that some 117 million households will be eligible and the IRS plans to start sending rebates by May. All you have to do is file your 2007 tax return.

Encouraging investments. About $50 billion of the $152 billion package comes in the form of business tax breaks, mostly through the method of accelerated depreciation. These incentives are designed to encourage businesses to ramp up their investment activity.

More affordable mortgages. The final component of the bill allows the Federal Housing Administration and other housing-related, government-sponsored enterprises to increase lending limits for substantial home mortgages. The crisis in the housing market has made it difficult for people to gain financing for so-called “jumbo” mortgages; this aspect of the package should make large mortgage loans easier to repackage and sell to investors.

What you do when you get your check depends on your personal situation. If you have high-interest consumer debt, I recommend using this windfall to pay it down. Otherwise, save it or invest it. In any case, this stimulus package almost certainly doesn’t represent the kind of money that will change your life. But it could offer a little boost to your family’s economic health. Take it and use it wisely.