Is My 2008 Stimulus Payment Taxable Income?

Short answer: No. The 2008 Economic Stimulus Payment is not taxable income for your 2008 income tax return.

But you were right to ask about it. When the president signed H.R. 5240 in February 2008, he referred to the economic stimulus payments as "tax rebates" and the I.R.S. was given the task of sending out the payments. To make matters even more confusing, the payments were not available to people that didn't file a tax return, nor were they available to people that had a zero tax burden for 2007. Without Congressional action, the payments would have been taxable, just like a refund payment is taxable. Fortunately, H.R. 5240 specifically stated that the payment would not be taxable income.

In small print at the beginning of a FAQ at irs.gov, the IRS informs taxpayers of this. It's understandable that most people didn't catch that, and many tax professionals have been cautious about confirming it. My research assistant was looking for it diligently, and still took several tries to find exactly where the IRS admitted it, here: Basic Information on the Stimulus Payment: "What is it? It's an economic stimulus payment that more than 124 million households will receive. It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return."

And another mention on page 62 of the 2008 1040 Instructions: "Economic stimulus payment. Any economic stimulus payment you received is not taxable for federal income tax purposes but reduces your recovery rebate credit."

Other resources:

Full text of H.R. 5240

Bill signing announcement