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Possibly. The Economic Stimulus Act of 2008 created a tax rebate for individuals that is based on income in 2007 and/or 2008. Most taxpayers qualified for the whole rebate on 2007 income, and checks were mailed to them in 2008. However, in 2009 the rebate was still available as a tax credit (not as a check) for a minority of people who did not qualify for the rebate check on 2007 income, or whose 2007 income qualified them for only a portion of the full rebate (see the discussion of income phaseouts below). People with stock compensation could have fallen into this group.
If stock option exercises or restricted stock vesting in 2007 caused a spike in your income that pushed you out of the rebate range, you might have been able to claim the rebate in the form of a credit on your tax return for 2008 because your income fell back to a qualifying level. Similarly, if you qualified for only a part of the whole rebate on your 2007 income, you might have been able to claim the remainder as a credit on your 2008 tax return. Fortunately, if your AGI in 2008 was higher than the 2007 AGI used to calculate the rebate you received, you did not need to refund any of the rebate with your tax return for 2008.
The IRS called this credit the Recovery Rebate Credit. According to the IRS, only a tiny fraction of taxpayers qualified for the rebate credit on 2008 income, chiefly because most people who were ever going to qualify for it received the full amount on 2007 income.
Rebate/Credit Amounts & Phaseouts
The basic rebate/credit amounts were: - between $300 and $600 for individuals with at least $3,000 in earned income, including Social Security benefits, and/or veterans' disability benefits
- between $600 and $1,200 for joint filers with at least $6,000 in earned income
- an additional $300 per qualifying child (analogous to the definition of the child tax credit), without a limit on the number of children
"Earned income" includes income from stock compensation reported on your W-2 (e.g. income from the exercise of nonqualified stock options or from the vesting of restricted stock or restricted stock units).
The rebate/credit was phased out at a rate of 5% of the amount by which your adjusted gross income (AGI, line 37 on your Form 1040) exceeded the thresholds of $75,000 for single filers and $150,000 for joint filers. Therefore, for singles with no children, the $600 rebate was eliminated at $87,000 of AGI, and for joint filers with no kids the $1,200 rebate disappeared at $174,000 of AGI. The point for complete phaseout would have been higher if you had children. Example: You are married, file jointly, and have two qualifying children. You were eligible for a rebate of $1,800 ($1,200 plus two $300 child rebates). However, if your AGI was $186,000, the rebate was completely phased out, as you were $36,000 over the $150,000 threshold (5% x $36,000 = $1,800). Incentive stock options (ISOs), if you exercised them and held the stock through the end of 2008, were not part of your AGI and therefore would not have affected the rebate (this spread was part of your AMT calculation). Similarly, the discount on shares bought in a tax-qualified ESPP and held through the end of the year were not included in AGI.
For content on many other tax return topics related to stock compensation, including annotated examples of Schedule D and Form W-2, see the Tax Center on myStockOptions.com. |
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