The final stimulus bill that flew through Congress yesterday is very close to the House bill, except with free stuff thrown in for old folks and veterans who might not get any free stuff otherwise. The rebates will work like this:

The IRS will look at your 2007 return. If you incurred at least $600 in tax, or $1,200 on a joint return, the IRS will mail you a $600 ($1,200 joint) check.

If your tax was less than that, the IRS will send you the lesser amount.

You'll also get a $300 check for each child for whom you received a 2007 credit.

The rebate will be reduced by 5 cents for each dollar your adjusted gross income exceeds $75,000, or $150,000 for joint returns.

For folks without at least $300 of 2007 income tax liability, the rebate works this way:

IF:

-you had at least $3000 of earned income (wages or self-employment), OR

- at least $1 of tax liability and gross income of at least $8,750 (or $17,500 joint);

OR

$3000 of income from self-employment, social secuirty benefits, or veterans disability or survivor benefits,

you will get a $300 check, or $600 for a joint return. You also will get $300 per dependent.

The credit phases out five cents for each dollar adjusted gross income exceeds $75,000 on single returns or $150,000 on joint returns. This means no credit for singles with AGI over $87,0000 and joint filers with AGI over $174,000, unless they have children; then the phase out stretches out to eventually reclaim the $300-per-child credit.

When you do your 2008 return, you will recompute the credit using 2008 numbers. If you compute a higher credit, you get the difference when you file your return. If the credit is lower using 2008 numbers, you won't have to pay it back.

Some examples, mostly adopted from the Joint Comittee on Taxation technical explanation, are at the bottom of this post (click "read more" below if you don't see them).

BUSINESS PROVISIONS

Increased Sec. 179 deduction. Section 179 allows businesses to expense in the year of acquisition the cost of non-rental property other than real property that would otherwise have to be capitalized and depreciated. This was to be limited to $128,000 in 2008. The stimulus package raises this to $250,000 for taxable years that begin after 12/31/2007 but before 12/31/2008. It phases out dollar-for-dollar as fixed asset purchases exceed $800,000.

Bonus Deprecation. The bill allows taxpayers to expense 50% of the cost of new property placed in service during the period beginning January 1, 2008, and ending December 31, 2008, regardless of your taxable year. Used property normally won't qualify. Aircraft and some property with a long construction period qualfiy through 12/31/2009. Qualifying property includes machinery, softward, and certain "qualified leasehold improvements." If there was a binding contract in place to acquire the property before January 1, 2008, the property will not qualify for bonus depreciation. Property placed in service after 2008 may qualify if it is aquired pursuant to a binding contract entered into from 1/1/2008 thorugh 12/31/2008.

Both bonus depreciation and Section 179 deductions are fully allowed in computing alternative minimum tax.

The five-year net operating loss carryback provision in the Senate bill did not make it into the final bill.

The TaxProf has a roundup, includings links to to the bill, committee explanations, and press releases.

Continued reading HOW YOU WILL BE STIMULATED...

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