The Economic Stimulus Package has been formulated and designed to help the United States moderate the worst effects of a slowing economy and what many economists think might be the precursor to a nationwide recession. Simply put, the idea is to encourage spending. Hopefully, with more spending the economy will experience increased activity.

But remember, this is just a theory, much debated on each side, with “supply siders” on the right, and “tax and spenders” on the left (politically). Either way, it will likely take months or years to know if the Economic Stimulus Package actually achieves its intended results.

Starting in May 2008, the United States Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return.

Eligible people will receive up to $600 ($1,200 for married couples). Parents will receive an additional $300 for each eligible child younger than 17. Millions of baby boomers, retirees, disabled veterans and low-wage workers who usually are exempt from filing a tax return must do so this year in order to receive a stimulus payment.

The payments have been promoted by President Bush and The Congress as an economic stimulus payment that households will receive. It’s not taxable, and it won’t reduce the recipients 2007 or 2008 refund or increase the amount owed with the 2008 return.

Especially for retired baby boomers, the economic stimulus law allows Social Security recipients and recipients of certain veterans’ benefits and Railroad Retirement benefits to count those benefits towards the qualifying income requirement of $3,000.

In addition, the Economic Stimulus Act of 2008 provides incentives to businesses. These incentives include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008. Under the new law, a qualifying business can expense up to $250,000 of section 179 property purchased by the taxpayer in a tax year beginning in 2008.

For homeowners, the FHA mortgage loan limits will more than double in some cases. The usual limit in high-cost areas in the lower 48 states will rise from $362,790 to $729,750. Such financing allows buyer to purchase homes with 3 percent down.

And, conventional loan limits will also increase. The maximum size of a “conforming” loan will go from $417,000 to $729,750.

However, these rebate checks are a one-time and one-time only cash windfall. While the government hopes that individuals will use the money for spending, thus stimulating the economy, many who receive the refunds will use the cash to pay down debts. Paying off bills can be a good place to spend the cash because it can mean lower monthly costs and better credit scores, thus lowering interest costs when you borrow to finance a home, car, or other major expenditure.

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