Transcripts

"Kevin McCormally's Tax Tips"-The 2008 Tax Rebate

SUSIE GHARIB: It's that time of year again, time to get out your calculator, the forms and your patience and get ready to file your Federal income taxes. The Federal filing deadline is Tuesday, April 15. So to help you get started, we'll have some tax advice every Monday night for the next five weeks. In tonight's tax tips, our tax guru, Kevin McCormally, editorial director of "Kiplinger's Personal Finance," says this year tax season starts on a nice note.

KEVIN MCCORMALLY, EDITORIAL DIR., KIPLINGER'S PERSONAL FINANCE: Before we start working to hold down the tax on your 2007 return, let's talk about the tax rebates the IRS will start sending to taxpayers starting May 2. The rebates are really a pre-bate of a tax credit Congress created for 2008. Most of us will get $600 or $1,200 for married couple, plus a $300 bonus for each child under age 17.

And the fact that this tax break is being prepaid brings some interesting twists. Let's say your 2007 income is too high to qualify -- over $75,000 on a single return or over $150,000 on a joint one. Don't despair. If your 2008 income dips below the trigger points, you'll get the credit when you file next year. The same goes if you have a baby this year. While the rebate is based on the number of kids under 17 in 2007, you'll get a $300 credit for a child born this year when you file for 2008. And someone who is denied a rebate this year because he or she is claimed as a dependent on mom and dad's 2007 tax return can get a $600 credit next year if they're no longer dependents. In other words, you get two bites at this apple.

Here's another interesting heads-you-win, tails-the-IRS loses twist. Let's say you get a check based on your 2007 income, but a spike in income -- maybe a big capital gain -- pushes your '08 income over the limit. Don't worry. The IRS can't ask for the money back. Ditto if a child turns 17 this year, after you collected the 300 bucks based on your 2007 return. Even though the credit is for 2008, you don't have to give back the $300. This is one tax issue where, rather than collecting money, Congress really wants to give it way. And that's a nice way to start the tax season. I'm Kevin McCormally.

For more tax tips, see NBR's annual "Tax Tips With Kevin McCormally" feature, where you can ask -- and get answers to -- your own tax questions.