| Common Questions About the Federal Rebate |
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Information about the federal rebate
Beginning in May 2008, the federal government will send rebate checks to most Americans in an effort to stimulate the economy. The following frequently asked questions address the rebates and how they relate to Oregon personal income taxes.
- Will Oregon tax the rebate?
No, the federal rebates and allowances are not taxable by Oregon. However, some taxpayers' federal tax subtraction on the Oregon return may need to be adjusted as a result of the rebate (see question 3 below).
- If I'm required to file a federal tax return in order to get the rebate, do I have to file one for Oregon as well?
Many people who normally don't have to file a federal return for 2007 will have to do so in order to get a rebate check. For example, an individual whose only income is $3,000 of earnings usually would not be required to file a federal return. These individuals should file either Form 1040 or Form 1040A to show the IRS they meet the $3,000 qualifying income threshold in order to receive a federal rebate.
If you are filing a 2007 federal return for rebate purposes only, your income is below the filing thresholds, and you are not otherwise required to file, do not file a 2007 Oregon return.
- What effect will the rebates have on the federal tax subtraction on the Oregon return?
The federal tax subtraction is a deduction on the Oregon return for the tax you owed the federal government. The tax rebates and allowances being sent by the IRS this summer represent a reduction in your 2008 federal income tax liability. The rebate must be taken into account when you figure your 2008 federal tax subtraction because it may cause a change in your 2008 Oregon federal tax subtraction. Note: You will not figure your 2008 federal subtraction until 2009 when you prepare to file your Oregon tax return for tax year 2008.
Example: Ed and Kathy receive a federal rebate of $2,100 in May 2008. Ed and Kathy receive $600 each and also receive $300 for each of their 3 qualifying children. In March 2009, they file their 2008 federal return and have a $5,000 federal tax liability. When figuring their federal tax subtraction on their 2008 Oregon return, Ed and Kathy will be required to reduce the subtraction by the rebates they received during the summer of 2008.
Ed and Kathy calculate their federal tax subtraction as follows:
| 1. | | Federal tax liability from 1040 | | $5,000 | | 2. | | Additional tax on qualified retirement plans | | -0- | | 3. | | Add lines 1 and 2 | | $5,000 | | 4. | | Tax rebates and allowances received from the federal government | | $2,100 | | 5. | | Subtract line 4 from line 3 (if less than $0, enter $0) | | $2,900 | | 6. | | Enter $5,500* ($2,750 if married filing separately) | | $5,500 | | 7. | | Enter the smaller of line 5 or line 6 here and on your Oregon return
(this is your federal subtraction amount) | | $2,900 |
Please refer to the 2008 forms and instructions, which will be provided by the Oregon Department of Revenue in January 2009, for further explanation and instructions.
*Note: $5,500 was the maximum federal tax subtraction for the 2007 tax year. This amount is subject to change for 2008.
- I heard that the federal stimulus package included changes to depreciation for businesses. Is this "bonus depreciation" available in Oregon?
Yes. Oregon is tied to changes in federal law such as depreciation.
- How can we find out how much our rebate will be?
Information regarding the federal rebate program is available at IRS.gov.
- My parents have not been required to file a return for many years. Will they automatically get a rebate?
No. Only those who file a federal 2007 return will be eligible for the federal rebate. Taxpayers with Social Security / Veterans benefits that are only filing to claim the rebate need to write "Stimulus Payment" at the top of their Form 1040 or Form 1040A. Please do not file an Oregon return if you are only filing to claim the stimulus payment (see question 3 above).
- I owe money to the State of Oregon. Will my rebate checks be offset to pay for that?
Possibly yes. The stimulus legislation passed by Congress allows federal and state governments like Oregon to offset debts you owe with the stimulus check. If the State of Oregon uses your rebate check (or a portion of it) to pay for your outstanding debt, you will receive a notice to that effect explaining the reason why. Please visit www.oregon.gov/DOR/PERTAX/docs/Trea_Offset.pdf for more information on the Treasury Offset Program (TOP).
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