Suppose Alice and Bob Smith have AGI of $125,000 for 2007, and two children under 17. Alice and Bob will get $1,800: their $1,200 rebate for filing a joint return and two $300 payments, one for each child.
On the other hand, suppose Alice and Bob have AGI of $170,000. They will be $20,000 over the $150,000 threshold so they’ll face the 5 percent phaseout.
Their rebate will be reduced by $1,000: 5 percent of $20,000. Therefore, they will get a rebate of only $800, not $1,800.
At the other end of the income spectrum, someone whose federal tax obligation for 2007 was less than $300 or $600, may still get a $300 or $600 rebate. That will be true for taxpayers with 2007 gross income over $8,950 (over $17,900 on a joint return).
In yet another possible scenario, suppose than John Jones entered the work force in 2007 and owes only $350 in federal income tax for the year. Instead of a $600 rebate, John will get only $350.
John is not completely out of luck, though. If his income picks up in 2008, he will get another $250 after filing his tax return for that year, bringing his total up to $600.
What’s more, parents of children born or adopted in 2008 will be entitled to a $300 payment in 2009, after filing a 2008 tax return.