Are tax rebates taxable?
Many taxpayers viewed last year’s tax rebate as a “free lunch,” meaning there had to be a catch.
These taxpayers were sure that they would be taxed on the money from the economic stimulus check, despite repeated declarations by the IRS to the contrary.
Well, it’s worth repeating, since we’re still getting asked about this: Money you got from the tax rebate is NOT taxable.
The 2008 returns, though, include a “recovery rebate credit” if you didn’t qualify for the rebate last year, but now you do.
The stimulus payment was an advance of a 2008 tax credit, but the IRS used your 2007 tax return information to determine whether you qualified. If your situation changed in 2008, you may now be eligible for the tax credit.
For instance, maybe you didn’t qualify last year because you were listed as a dependent on your parents’ 2007 tax return. Dependents didn’t get rebates. But if you were no longer a dependent in 2008, you could be eligible for the credit this year.
Again, the line on the tax form is to allow you to claim a rebate you didn’t get or to claim a larger one than you received last year. It is not a line designed to tax last year’s rebate.
