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Early Tax Planning:
Mortgage Interest
If
you are a homeowner, planning for tax day should start now.
For
most people mortgage interest is still the biggest, single tax deduction
they claim. And it’s possible to stretch this benefit (some would
call it a right) even further.
This
year plan to make an extra payment on your mortgage. You can
accomplish this in two ways: bi-weekly payments or a single extra payment.
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If
you make 26 bi-weekly half payments, you have made the equivalent of
an extra full payment by the end of the year. For example, on a
$100,000, 30-year mortgage at 8%, you can save almost 30% in interest
expenses and shave off nearly 8 years on the loan. The extra monies go
directly to principal, you increase your equity and reduce your
interest costs over the life of the loan.
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Alternatively,
you could make a single extra payment in December. The IRS does
not allow pre-paid interest deductions. However, because your
January statement often reflects interest built-up in December, they
will consider this a January payment. If the Form 1098 from the
lender does not reflect this payment, you must attach an explanation
to your return. Thus, the interest that you normally would pay
in January counts for the current tax year and helps increase your
deductions, if you itemize.
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If
the early bird gets the worm, today’s a good time to decide how to
maximize your investment in your home and reduce your taxes.
As
always, everything may not apply to your individual situation.
Please seek the help of a tax professional if you have questions.
Copyright
© 2001, Marabella Books |
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