With the first rebate checks arriving this week, I want to let some of my clients know that they will not be getting a rebate.
For joint filers the rebate begins to get phased out when you Adjusted Gross Income (AGI) is greater than $150,000. After that you lose $50 for every $1,000 your income is over the threshold. For example, if you AGI is $160,000 you rebate is reduced by $500.
For those filing as single the threshold for a reduced rebate begins at $75,000. Your $600 rebate would be reduced to $0 once your AGI reaches $87,000.
For those of you getting a rebate below are 5 great things to do with it:
- Increase your contribution to your employer’s 401k/403b to get the full match. For an employer that matches $.50 for every $1 you contribute your $600 rebate is instantly worth $900.
- Contribute to a Roth IRA. With a Roth IRA your earnings grow tax free. In 25 years that $600 could be worth $4800 with no tax due when you withdraw it!
- Pay off high interest credit card debt. If you are paying 24% interest on a credit card paying it off is like getting a 24% return on your investment. Paying $600 would save you $144/year in interest payments
- Start an emergency fund. This is the money you use when the car breaks down etc. instead of running up a credit card debt. Open a high yield internet savings account at www.ingdirect.com, www.emigrantdirect.com or check www.bankrate.com for the latest savings rates.
- Open a 529 account for college savings. The Bright Start Illinois Plan was ranked as one of the best in the nation by the Wall Street Journal. Plus Illinois residents get a state tax deduction for any money they contribute. See www.brightstartsavings.com