With 2016 right around the corner, now is the time to help yourself save on taxes.

There are many tax breaks associated with home-ownership, and the best way to maximize these is to move funds before the end of the year. Making a mortgage payment in early January can lower your IRS bill because it includes your December interest. There are some regulations though. You cannot make payments for any other months, such as February, and tax laws generally prohibit prepaid interest deductions. There are ways that early mortgage payments can help you cut taxes though.

Timing

Just dating a check December 31 and hoping it arrives on time may not necessarily grant you the tax deductions that you are seeking. If you are proactive and get the check to your bank or lender before the end of the year, then you won’t show any red flags to your tax examiner. This means the extra interest will show up on the lender’s paper work, and the amount you claim on your Schedule A will match what your lender reported on the 1098 form. However, if your year-end mortgage statement still does not reflect this extra interest, deduct it yourself on your tax return and attach an explanation as to why your number is the correct one.

Alternative Minimum Tax

The Alternative Minimum Tax (AMT) was devised in 1969 to ensure that those filing in the higher tax brackets were paying their fair share of taxes to the IRS. However, this also applies to upper-middle class filers as well. Under the AMT, some traditional tax breaks aren’t allowed, however mortgage interest on main and second homes is still accepted.

Remember

If you make an early payment this year, giving you 13 mortgage interest amounts to deduct, next year you will only have 11 or 12 if you pay early again next year. Think ahead to see if you really need the extra deduction this year, or if maybe the extra deduction will help you next year instead.

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For real estate inquiries, stop by the beautiful Montrêux Welcome Center at 16475 Bordeaux Dr. in Reno, NV or call us at 775.849.9444. The Welcome Center is open 7 days a week, from 9:00 am – 5:00 pm.