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Peter did a nice job of explaining things. I'll only add this. If you find you paid next year's interest in December and the bank doesn't show it on the 1098 you can still include it in itemized deductions. Just be sure you have some evidence of the early payment, such as a bank statement showing your check cleared in December. You'll probably get an inquiry someday from the IRS about the discrepancy between your deduction and the 1098. You merely have to explain it and provide your evidence. However, be sure the following year to deduct the previously claimed interest from the amount on the 1098.
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