Thursday, Feb. 28
Posted 8 a.m. EDT
Taxes on your rebate money?
It's a good thing that the stimulus package checks, commonly referred to as
rebates, aren't going out until May. It's going to take that long for the IRS
and taxpayers to sort through all the issues.
Right after the stimulus package became law, we published some rebate
FAQs. But we're still getting lots of questions. So for the next couple
of blog postings, I'll answer some of the more common inquiries.
Let's start with a big one: Will I owe taxes on my rebate money?
First, let me say it's great to see that Bankrate readers are so tax-savvy
and realize that Uncle Sam usually wants a cut of most of the money we get.
In this instance, though, I am happy to report that the stimulus checks will
not count as taxable federal income, so you won't have to worry about reporting
your $300 or $600 or $1,200 or more as income on your 2008 return.
But it could be a very different answer when it comes to state taxes.
As I talked about in
a previous post , state and federal tax laws don't always automatically
align. Sometimes they are polar opposites, with many states already facing budget
crunches holding on tight to any tax revenue they can collect.
And that could include state taxes on this federal tax rebate.
So far, information is scarce. My online search has turned up just two mentions
of state taxes in regard to the stimulus package.
Alabama tax law, according to an editorial
in the Montgomery Advertiser, does call for taxing the federal rebate money.
That would generate an additional $55 million for the state.
New York residents get better tax news. Last week, Gov. Eliot Spitzer announced
that the federal stimulus rebate payments will not be subject to New York personal
I suggest you check with your state's officials. Don't be surprised if they
don't have an answer for you yet. Since the stimulus checks will be arriving
in 2008, state lawmakers might not have yet considered how they will handle
taxing or not taxing the federal money next year when residents have to file
their state tax forms.
You can find a link to each state's tax department with contact information
state tax directory pages. Links to the 50 governor home pages can be found
at this Global
Computing Web page.
If you find out the specifics of how your state plans to tax (or not) your
federal rebate money, drop me a note and I'll share the info with the rest of
And we'll see you back here later today with some more common rebate questions