Q: Will I have to pay taxes on the rebate that I am getting?

— R.S., Cranston

A: No. And there’s a new development on this front. But first, let’s focus on your federal income tax.

A report issued by Congress’ Joint Committee on Taxation says that if you receive a rebate, “the amount is not includible in gross income.”

In other words, it’s a freebie. The Internal Revenue Service has also confirmed that the rebate won’t be subject to federal income tax.

Rhode Island state Tax Administrator David M. Sullivan told MoneyLine that the rebate won’t be taxed by Rhode Island.

And last week, Massachusetts Revenue Commissioner Navjeet K. Bal announced that the rebates — also known as “economic stimulus payments” — won’t be taxed by Massachusetts, either.

“Since the economic stimulus payments are not included in federal gross income, they are not included in Massachusetts gross income and thus not subject to the Massachusetts personal income tax,” Bal said.

The Massachusetts tax treatment of the rebates is spelled out in Technical Information Release 08-5, available at:

www.mass.gov/dor

Q: Would you know of any way I can change the status of my [rebate] to direct deposit? I did not know this was an option . . . and of course I would love to get my money faster. . . .

— R.M., East Providence

A: To have your rebate deposited directly into your bank or credit union account, you had to have filled out the “direct deposit” section of your federal income-tax return.

If you didn’t fill out that section, the U.S. Treasury will mail you a rebate check, said IRS spokeswoman Peggy Riley. (If you’ve already filed your return, you can’t go back and change it to try to elect direct deposit, she said.)

In general, people who filled out the “direct deposit” section of their returns will receive rebates faster than those who didn’t.

The good news, though, is that all the rebates are coming out a little earlier than planned.

For example, the Treasury began distributing the direct deposit rebates last Monday, about four days earlier than scheduled.

And this Friday, the Treasury will start mailing rebate checks, about a week earlier than planned.

Q: In the April 27 MoneyLine for rebates for direct deposit, you state: “If married and filing a joint return, the IRS will use the last two digits of the first Social Security number listed on your return” to determine when to direct deposit [the] rebate. Will the rebate be in one sum for the joint filers, or two deposits for each name on the return? For those who request payment by check, one check for joint return, or one check for each to be mailed according to the last two digits of [the Social Security number]?

— L.G., Cranston

A: The Treasury is issuing the rebates in a certain order. In general, direct deposits come first, paper checks come later.

In either case, the Treasury is relying on the last two digits of a taxpayer’s Social Security number. In general, the closest those digits are to “00,” the sooner the rebate arrives; the closer those digits are to “99,” the later the rebate arrives.

What if you’re married and filed a joint return? The Treasury will look to the last two digits of the Social Security number that appears first on the return.

So if Joe and Mary Taxpayer filed a joint return by last month’s filing deadline, and Joe’s Social Security number is listed first on the return, that’s the one the Treasury will look to.

Also, a married couple who filed a joint return will receive one rebate payment, not two, Riley said. That’s true whether your rebate is deposited directly into your bank account, or comes by mail, she said.

The new federal economic stimulus law, which made the rebates possible, says that, when it comes to joint returns, “half of [the rebate] shall be treated as having been made or allowed to each individual filing such return.”

Does that mean a married couple gets cheated? No. The minimum rebate amount is $300 for someone who’s single, but $600 for a married couple. The maximum rebate is generally $600 for someone who’s single, but $1,200 for a married couple.

So let’s say you and your wife have no young children and are eligible for the maximum rebate.

If you filled out the “direct deposit” section of your federal income-tax return, the Treasury will make one deposit — of $1,200 — into your bank account.

If you didn’t fill out the “direct deposit” section of your return, the Treasury will mail you one check, made out to the both of you, for $1,200, Riley said.

TODAY’S TIP: When the Treasury’s Bureau of the Public Debt posted new rates for U.S. Savings Bonds last week, it also issued a reminder that some savings bonds have stopped earning interest and should be cashed in.

For example, savings bonds issued from May 1941 through May 1978 no longer earn interest. The same is true for all U.S. Savings Notes (also known as Freedom Shares), which were issued from May 1967 through October 1970.

Series E Bonds with issue dates from June through October 1978 will reach final maturity during the next six months.

(All Series EE and Series I bonds continue to earn interest.)

Note to Readers: More reader questions about the rebates will be published in tomorrow’s MoneyLine.

Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

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