It’s a common practice for homeowners to pay their January mortgage during the month of December to help reduce their taxes. If you did this, you may be interested in learning how this will impact your 2014 taxes, which you’ll pay in 2015. With this early payment, you most likely made 13 interest payments throughout the year instead of 12. This means that you’ll be able to deduct an additional month’s worth of interest payments when you file your taxes.
It’s important to remember that if you pay January’s payment in December, you’ll have to do the same thing in 2015 to avoid only being able to deduct the interest from 11 payments. Depending on your interest rate and credit, you will be able to itemize your deductions. Your itemized deductions must be lower than your standard deduction, which is $12,400 for people married and filling jointly or $6,200 for single filers.
If you’re unable to itemize your deductions because your interest expenses and other deductions are too high, then you may want to alternate between making 13 payments one year and 11 payments the next so that you can itemize your deductions every other year. If this allows you to itemize your deductions, you can then also deduct any charitable contributions and auto registration.
Another option is to pay additional principal payments on your loan each month. This course of action may reduce your interest payment to the point that it will eliminate your tax deduction, but it will help you reduce your total balance, which may save you more money in the long run.
For more information on how your mortgage payments will affect your taxes, read the full article, “
Will That Early Mortgage Payment I Made in December Affect My 2014 Taxes?,” on the Equifax Finance Blog.