Understanding Your Tax Rebate

A tax rebate is a refund given on federal or local taxes to corporations or individuals who qualify. Tax rebates result in the government issuing a paper check to an individual for a surplus of taxes previously paid. In essence, the individual withholds pay during their work week; this pay which is used by the federal government to fund public services, wars, and current expenditures is later returned to the individual in the form of a tax rebate.

Tax rebates are typically offered to those applications where the tax liability is less than the total amount of taxes paid. The most common case of a tax rebate occurs when the individual taxpayer owes less than the sum of the total amount withheld from their incomes taxes.

Therefore, the individual fulfilled his or her income tax requirements during the course of the year. Tax rebates result when the estimated taxes paid plus the refundable tax credits claimed exceed the amount owed on the income tax form.

Each tax year, throughout the country, a massive number of U.S. taxpayers receive tax rebates; the large percentage of tax rebates stem from withholding calculations and the earned income tax credit that was recently passed by Congress.

Withholding is calculated on an annualized basis, therefore an individual just entering the work fore will have more tax owed than withheld. The key to earning a rebate, therefore, is to accrue a year's salary, because each pay period represents a percentage withheld by the federal government.

NEXT: What are Refund Anticipation Loans?