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Are there any legal strategies for bunching mortgage interest deductions into one tax year? One of the tax writers on MSN says that you can pay a mortgage payment on Dec 31 that is due in January and take the deduction in the current year. He says this is legal because the interest was for the use of money in December.

He's right. However, remember that this leaves you with only 11 months of interest the following year, unless you do the same thing the next December. This strategy makes sense only if you're going to itemize only every other year. For example, in Dec. 2001 you pay the Jan. 2002 mortgage payment and itemize deductions on your 2001 return. On your 2002 return you take the standard deduction. In December 2003 you pay the January 2004 payment and itemize on your 2003 return. Etc. If you're going to do this, also take a look at your real estate taxes, state estimated tax payments, charitable contributions, etc. It's called deduction lumping, and it makes sense for some people. For many people, it isn't worth the bother.

Another related question is, can you purposely pay a mortgage payment late(in the following year) and claim both the late payment and the interest in the following year?

Interest is deductible when paid. Late payment penalties are not deductible.

Phil Marti
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