A Tax Saving Tip for the end of the year

by Tom Tousignant

in Blog, Tax Tips


Tax deductions If you want to save a few bucks on your 2011 tax bill, there is a simple tip that can help:   Make your January mortgage payment a few days early.

It’s a simple strategy that works because of how mortgage interest works.

Unlike rent which is paid in advance at the start of a month, mortgage interest is only paid after it’s been borrowed. Your January mortgage payment, therefore, accounts for the interest that accrued in December.

And for a lot of Charlotte Homeowners, that mortgage interest is tax-deductible.

By making January’s mortgage payment in December, eligible homeowners can apply the interest paid to 2011’s tax returns instead of waiting to claim the deduction next year. Don’t cut it close, though. It’s best to remit payment prior to the last week of the month, leaving your servicer ample time to receive and process your paperwork.

As a quick example, if you pay $2000 per month on your mortgage, and are in the 28% tax bracket, you will reduce your tax bill by 28% of the interest paid on that mortgage payment.  You can see how much that would be on your Amortization Schedule.  You were given a copy of the Amortization Schedule at your last closing, but if you lost it, or if you ever pay any extra principal on your home loan, then ask me and I’ll create a new schedule for you for free.

Most importantly, though, before prepaying on your mortgage, talk to your tax professional.  I know a few great CPA’s in Charlotte if you need a name.

Not every homeowner is eligible for mortgage interest tax deductions, nor should every homeowner itemize their respective tax deductions. The “pay early” plan could be a wasted effort for you, ultimately, depending on your taxpayer profile.

If you don’t have an accountant that you trust, call or email me anytime; I’m happy to make a recommendation to you.

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