Time is running out to boost to your 2011 federal tax refund. All you have to do is make your January 2012 mortgage payment while it's still December.
It's a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.
Different from rent which is paid for the month ahead (i.e. "you're paying January's rent"), mortgage payments are made only after mortgage interest has accrued (i.e. "you're paying for money you've already borrowed from the bank").
This is called "paying interest in arrears" and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.
By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment's interest portion to their 2011's tax returns.
The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.
If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.
For Ulster County homeowners that pay electronically, the process is simpler. Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.
Make note, however. Not all mortgage interest is eligible for tax-deductibility, and not all homeowners throughout the state of New York who pay mortgage interest should itemize said interest on their tax returns.
Before prepaying on your mortgage, ask your tax professional for advice.