More Answers to Your Questions about Tax Rebates

David McPherson responded to more of our viewers' pressing tax rebate queries.

ByABC News
January 27, 2008, 11:38 AM

Jan. 27, 2008— -- On Friday, we invited "World News with Charles Gibson" viewers to submit any additional questions about tax rebates in the economic stimulus plan. We read through your online submissions, and ABCNews.com personal finance columnist David McPherson responded to some of our viewers' pressing questions about tax rebates.

Thank you for participating in our online discussion.

What If I'm a Retiree on Social Security?

Question: "Will tax rebates be given to retirees on Social Security who are not working? Will there be income parameters? Thank you."Carrie from Bradenton, Fla.

McPherson: Carrie, retirees will be eligible to the extent they owe federal income taxes on Social Security, investments, pensions and other income sources. Social Security benefits do not qualify as earned income, but Social Security payments are taxable above certain income levels.

What If My Spouse's Income Is Tax Free?

Question: "My husband is in the military and he is stationed in combat zone therefore all of his income is tax free. My question is this, how will that affect our tax rebate if our income tax return only shows my income? And by the way, we have three children."Misty from Ridgecrest, CA

McPherson: Misty, there are a couple issues to consider in your case. First, if your earned income from a job or business -- apart from your husband's combat pay -- was at least $3,000 last year, then you would qualify for $300 rebates for each of member of your family: you, your husband and your three children.

Even if you yourself did not have earned income of at least $3,000, your family still may qualify under your husband's combat pay. Even though combat pay is nontaxable, you can elect to have it considered earned income for the purposes of the earned income tax credit.

Tax-free combat pay also is considered earned income for the purposes of contributing to an IRA. These factors lead me to believe there's a good chance combat pay may be counted as earned income for the purposes of the tax rebates.

But stay tuned. As with all questions, the final details will depend upon what Congress and President Bush do. For more information, you may want to consult IRS Publication 3, Armed Forces Tax Guide, which is available at www.irs.gov.

What If I File Head of Household?

Question: "How does this affect people who file head of household? Are they considered single taxpayer?"Darlene from Atlanta, Ga.

McPherson: Darlene, the head of household is treated as a single individual eligible for one rebate plus rebates for any children. The minimum rebate for an individual with at least $3,000 in earned income is $300, but it can be as high as $600, depending upon how much that person owes in federal income tax.

Question: "How does the rebate work for a married couple filing jointly with only one person working?"Frank from Lewiston, Penn.

McPherson: Frank, the rebate amount will depend on the couple's joint income, regardless of whether one or both work.

What if I Didn't Owe Taxes This Year?

Question: "I am so confused about the package. I am a single mom who runs a very small childcare service. I only cleared $8000 for the year and even though paid out money to my social security and Medicare it came out in my tax return to get back what i would pay in federal taxes so i ended up not owing anything in taxes does that mean i don't qualify for the tax rebate??"Marykathryn from Tobyhanna Penn.