The end of
the year is nearly here, and many people are still making all of the
last-minute financial transactions they can to reduce their tax liability for
the upcoming tax season. There are a number of transactions individuals can
make to qualify for a tax credit or deduction, ranging from eligible medical
expenses to charitable contributions, but one lesser-known action people can
take involves the timing of a payment homeowners make each month: their monthly
Revenue Service allows homeowners to deduct mortgage interest paid out over the
course of a year, and some individuals capitalize on this rule by making
their December mortgage payment before the end of the year. The set-up of the
payment system makes scenario easier for many people. When a person rents a
property, they are required to pay their monthly balance beforehand - meaning
that a tenant must satisfy their January payment in December.
mortgage payments, the opposite is true. Homeowners make their monthly payment
in the month following their occupancy, which means that most people pay their
December balance in January. However, by making this payment by Dec. 31, 2013 -
instead of waiting until the standard Jan. 7 deadline most people are
accustomed to - their Jan. 1 mortgage statement represents interest
for the month of December, making it a tax-break-eligible bill for this year,
There are some tips and guidelines to keep in mind though before choosing to
make an early payment. One of the most obvious rules is making sure the payment
is in to the lender on time to claim the interest deduction. Cutting it too
close to the wire could mean that lenders don't process it in time, which means
the mortgage interest associated with the payment won't count on the
homeowner's 2013 tax return. While individuals might date their check for Dec.
31 or earlier, they might benefit from ensuring it's delivered to their lender
a few days before the last business day of the year.
individuals should keep in mind that making an early payment is a practice that
should be limited to the end of the year. They should refrain from making
February, March and other upcoming payments for the purposes of the mortgage
interest deduction, as write-offs for prepaid interest is generally
prohibited - except in certain cases involving loan points.
For a more
in-depth look at Liberty Tax Service, visit the Give Me
Liberty! Magazine. Follow Liberty Tax on Facebook and on Twitter or contact
Liberty Tax directly at 1-877-at-Liberty.