Many homeowners are able to deduct the amount of mortgage
interest they pay on Schedule A of their tax returns. This deduction reduces the amount of income
that is actually taxed by the IRS.
Interest can be deducted in the year it is paid. So, by making your January payment in
December, you will be able to deduct that interest on this year’s taxes.
A few things to consider before you make your January
payment early.
1)
Not all people can deduct their mortgage interest
on their taxes. The IRS offers this flow
chart to see if your mortgage interest is deductible: Is My Home Mortgage
Interest Fully Deductible?
2)
Some tax filers are subject to an Alternative
Minimum Tax (AMT) which reduces deductions allowed. This may limit the effect of paying your
January payment early.
3)
Only your January 2013 payment may be deducted
if paid in December 2012 – this is because the interest due on your January
payment is actually interest accrued during December 2012. If you try to pay February or other months
early, it will be considered pre-paid interest which is generally not
deductible.
4)
If you intend to pay your January payment in
December, it is a good idea to get it in early.
With the holidays and the end-of-the-year rush, lenders are extremely
busy. You want to make sure there is enough
time for them to receive your payment and post it before the end of the year.
5)
By paying your January 2013 payment in 2012, you
will not be able to deduct the interest on next year’s taxes.
I am not a tax professional. Please do not take this as tax advice. It is simply one strategy to increase your
deductions for 2012. Please consult your
accountant or tax professional before undertaking this or any other strategy. If you do not have a tax professional and are
looking for one, I have worked with many over the years that are experienced professionals
who can help you make the decisions that are right for you. I would be happy to refer you to them.
I can be reached at BarkerLoans@gmail.com
with any questions you may have or if you are in need of financing assistance. Rates are still really low and housing is
still the most affordable it has been in years!
Now is the time to buy that home or refinance your existing mortgage to
save money. I would be happy to assist
you. Please go to www.BarkerBlog.com for more mortgage and
housing related information. On Facebook
you can find me at www.facebook.com/BarkerBlogCom.
