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I am a tax professional yet I always find myself confused about these phrases, especially when speaking to a client.  In fact it is very common for folks to be confused about the difference between a “tax season” and a “tax year” and don’t even try to figure out the tax return year.  Well allow me to clear it up for those that are still confused, I think… 

Tax Season

The Tax Season is commonly used to describe the time between January 1 and April 15 of each year.  This is the time that we all file our personal taxes for the previous tax year.  Just to add to the confusion, tax seasons also occur within a tax year. 

Tax Year 

The tax year is simply the year in which you earned income and therefore must pay Uncle Sam a portion.  Each year is a different tax year.  At the time of this writing we are in Tax Season 2010 for Tax Year 2009.  Sure this is Tax Year 2010 but we don’t really care until Tax Season 2011 right..??

When in a conversation with your tax professional, she may ask a question about last years tax return.  This often confuses my clients because they don’t know if I’m referring to tax season or tax year.  If you are confused by this question ask your tax professional which they are referring to, year or season.  More than likely she is asking you about your previous years tax return. 

Tax Return

This is when it really gets confusing so I typically stay away from associating a year with the phrase tax return.  So how do we refer to “tax returns” when it comes to the year.  Afterall tax reurns are filed during a tax season but they are accounting for taxes paid during the previous tax year.  Well here it is.  The “tax return” year is the same as the “tax year”.  Next time your tax pro asks you about a previous tax return just replace the word return with the word year and it all makes sense..right?

Both the Senate and the House have officially passed the extension of the Home Buyers Tax credit today.  The extension includes existing home owners for up to $6500 credit.  Up next President Obama.  More news to come.

The battle to extend the First Time Home Buyers tax credit has taken an even better twist.  Senate Democrats are not only in favor of extending the original credit but are also seeking to include existing home owners as well.  This is very good news for those that have not already taken advantage of the credit but even better for those that did not qualify under the previous plan.  The new proposal is to include a $6500 tax credit to existing home owners if they have lived in their current home for at least 5 years.  The buyers must make under $125,000/year single and $250,000/year married filing jointly.  According to a Senator Harry Reid aide Regan Lachapelle, the new proposal still faces some resistance from Republicans.  More information to come.

According to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment on a new home.   “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down-payment,” Donovan said.    FHA’s approved lenders will be allowed to “monetize” the tax credit which in turn will allow eligible home buyers to access the funds immediately at the closing table vs. waiting for the credit on their 2009 tax returns. 

Anyone looking to take advantage of Tax credit but was unable to come come up with the down payment can now get in the game.  So what are you waiting for?  For more information read here.  

UPDATE:  May 18:

It looks like it may not be etched in stone just yet.   The Boston Globe  reported on Thursday that the letter was rescinded by HUD and.or FHA.   More news to come..

UPDATE May 29:

Its official HUD announced on Friday that first time home buyers can use the credit as a down payment.  According to NAHB economist Robert Dietz, lenders purchase tax credits from the buyers and then collect the rebate from the IRS.   This appears to be a better option than the bridge loans offered by some states prior to this announcement by the feds.

It’s been a while since my last post but I promise I won’t be long winded this time.  I’ve decided that I’m going to sell Old E Baltimore project.  The work has been done for over a month but with a few loose ends to tie up.  The house has a new furnace, hot water heater, toilets, tub, tile, refrigerator, oven, cabinets, carpet, deck, fencing, flooring, carpet, rails, and the list goes on.  It’s a great opportunity for an investor looking to get a rehabbed house with 4 bedrooms in the city.  Currently through section 8, the new owner could be looking at over 1100 dollars per month and a mortgage payment of less than $550.  My next post on this property will include pictures but if anyone is interested in seeing the house, feel free to click on the About Fliprent link at the top and click the Contact Me link to send me an email.  You can also leave a comment on this article if you choose to.

Ideas, Ideas.  I’ve decided to go forward with a business idea that I’ve had for a while.  I’m going to need to put some cash into it considering how difficult it is to get a business loan in the current economy.  Liquidity is a beautiful thing when you need access to quick capital.  There was a time, just a few years ago when a residential real estate investment was considered relatively liquid.  Today is another story. 

It appears that more than just homeowners are walking away from foreclosures.  Apparently banks are too.   This is thought by many to be the next wave of the housing crisis.

On another note the Old E. Baltimore project is mostly done but I still need to get past the inspections for city and section 8.   I’m on my fourth plumber now and counting.  Hopefully this one will get it right and actually pass the inspection.  Once that’s done I’ll post pics but its probably not a good idea to post them before.  Most of the work on this one was done prior to my purchase so the inspection is always a crap shoot.  It really just depends on the inspector and his/her mood.

Let the games begin!  Today, March 5 is the official first day that home owners can call their mortgage companies to apply for mortgage relief under the new Homeowner Affordability and Stability plan by the Obama administration.  Administration Officials said that homeowners could actually start making calls yesterday and banks like JPM Chase and SunTrust reported call volume increases of 150 and 50 percent respectively.   Homeowners will need to be patient as lenders scramble to get their systems in place to handle the huge increases in call volume.  Some callers have reported waiting for several hours before getting through to speak with a real person.  Banks such as Bank of America and Wells Fargo have given high marks to the plan along with many economists who think that the new guidelines will help with the current crisis.  Under the plan homeowners with loans as large as $729,750 may see their interest rates cut to as low as 2 percent.   The refinancing part of the program is expected to reduce payments for up to 5 million homeowners but is limited to loans owned or backed by Fannie Mae and Freddie Mac.  Homeowners must also apply by June 2010. 

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So far I like what I’ve seen from the American Recovery and Reinvestment Act (ARRA) signed by President Obama last Tuesday.   From a Tax perspective it appears to contain some very good relief for the average American citizen.  Some of the highlights from the new plan include a new refundable credit of up to $800 for lower and middle income America.  Unless you make more than 95k single or 190K MFJ, you should qualify for this credit.

 Also included in the ARRA economic stimulus plan is an expanded Hope Credit. The new credit is called the American Opportunity Tax Credit.  The new credit can be taken for all 4 years of college instead of the first two and has been increased to a maximum of $2500.   The best part of this credit may be that up to 40% of the credit is refundable.  This means that it can be added to your refund or perhaps even result in a refund even when the taxpayer would have otherwise owed.  Also parents with Section 529 plans for their kid’s college will be happy to know that computers and Internet access are now considered qualified higher education expenses for purposes of the section 529 distributions.

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The Old E Baltimore project is finally moving again.  The old contractor is out of the way, at least for now.  The new guys have the deck, fencing exterior doors and most of the patch up work completed.   The punch-out work can sometimes take just as much time as the larger projects.  I must admit that the majority of the delay is due to my inability to get around.   Getting back on my feet took several months and is still a work in progress.   Health problems can derail a business, especially when you are the business.   Make sure you plan for situations like these by having at least six months of mortgage payments in savings.  Also look into purchasing long/short term disability.

The last items on the list are the range, refrigerator, gutters/down spouts, plumbing and cleanup.   The plumbing work is a story all by itself.  The problem is mostly due to the contractor’s use of the toilet even though it was not working.  I’m not even sure if the toilet is any good, let alone the fact that the water isn’t even on in the house.  The toughest part of this real estate investing business is working with contractors.  If you have a weak stomach, find something else to do. Needless to say this will be a messy job for the next plumber.   I sure hope he has a mask… 

 Next up on the list will be the city inspections, followed by the section 8 inspections.  I’m sure I’ll have a whole new to do list soon. 

We’ve all heard the news that existing home sales in December 2009 surprisingly increased.  Previously owned homes in the US increased 6.5% to a 4.74-million-unit annual sales rate, according to the National Association of Realtors. This was very surprising considering most analysts had predicted sales at a 4.40 million unit pace.  Some analysts say that this could be a sign that the bottom is near., although the spark was mostly due to distressed foreclosure sales in states like California and Florida. 

Not everyone agrees that the housing market is anywhere near the bottom.   According to James R. Hagerty of the Wall Street Journal, economic indicators show that the housing market is not looking any better for spring 2009.    Dave Johnson and James Boyce of the Huffington Post believes that there is another entirely new bubble on the horizon that they refer to as the double bubble. 

It seems for every analyst predicting an upswing there is an antagonist waiting in the wings to disagree.   Heck!   That’s a 50/50 chance that it could swing either way.  Those odds are a lot better than at this time last year.