- quote -

I'm not sure why you say that. All the mortgages and home
equity loans I've ever taken out say in the loan paperwork
that if you pay more than the amount due, you have the
option of designating it either as advance payments (i.e.,
"stop billing me until this money runs out") or extra
principle for the current month (i.e., "subtract this from
my balance but bill me again next month").

In either case, the paperwork has always said that any money
you give them is first applied to accrued interest and then
to principle. It stands to reason, then, that if you give
them a big advance payment, most of it will apply to
principle, and then a large amount of interst will accrue
until the advance payment runs out, and then when you start
paying again you'll be paying off that interest.

This seems to be the allocation method spelled out
explicitly in the standard mortgage loan paperwork that most
banks use, and I find it hard to believe that such standard
language would not be "in keeping with general accounting
principles." Can you clarify why you say this, and what you
think the correct allocation would be?

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Jonathan Kamens wrote:

- quote -

I don't think this allocation is in keepking with general
accounting principles. But, if the bank would report it
that way, the IRS would accept it.

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jik[at]kamens.brookline.ma.us (Jonathan Kamens) wrote in

- quote -

<snipped
I discovered once that prepaying principal did NOT reduce my
monthly payments, as I had hoped. It just shifted the
proportion of principal and interest, since I had prepaid a
portion of the principal. That resulted in *less* of my
monthly payment henceforth going to interest, and more to
principal. So the advice to make sure the bank understands
what you want to do is essential.

--
Best regards
Han
email address is invalid

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I recently discovered by accident another good way to shift
deductions into the next year -- prepaying your mortgage.

If you have extra cash lying around to make payments through
the end of the year in advance, then most of what you pay will
be applied to principle rather than interest. Then, when you
start paying again in the next year, all of your payments
count completely toward interest, and therefore all of your
payments are completely deductible, until you've paid off all
the interest that accrued while you weren't paying in the
previous year.

If you want to do this, you need to make sure the lender
understands that you're making advance payments rather than
paying extra with the current payment but still wanting
payments to continue to be due for the rest of the year.

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MB wrote:

- quote -

Nowhere else, assuming you are an employee.

However, depending on the total of deductions, check to see
if your state might tie itemized deductions to the federal.
If so, you might "choose" or as we are fond of saying
"elect" to itemize and give up some tax savings on the
federal in order to gain more tax savings on the state
return.

Cheer$,
Harlan LUnsford, EA
Phenix City, AL

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mel[at]prodigy.invalid.net (MB) posted:

- quote -

Well, technically you can always itemize. It's just that it
is preferable for you to take the standard deduction because
it is higher than the total of your itemized deductions.

No, "traditional" Schedule A deductions can't go elsewhere.
However, there are other deductons available in the form of
tax credits (for education expenses, retirement savings,
foreign taxes paid, etc.) and there are also Adjustments to
Income, independent of the Schedule A deductions.

Bill

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"MB" <mel[at]prodigy.invalid.net> writes:

- quote -

No.

You're looking at it the wrong way.

It's not that you can no longer itemize, it's that you no
longer NEED to itemize, that with no work at all you're
getting a bigger deduction than you would have if you had
itemized.

If you want to, you're free to itemize even when the standard
deduction is larger than your itemized deductions. And
indeed, that is the appropriate thing to do in some
situations, e.g., when AMT comes into play. But if your tax
due is higher when you itemize than when you don't, then you
should consider the standard deduction a gift from Uncle Sam
and not lose any sleep over it.

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MB wrote:

- quote -

Lots, but only every other year and on Schd A! Move
deductable expenses to alternate years!

Instead of donating $1000 to your church every year, donate
$2000 every other year.

Default on property taxes in one year, pay them next year
thus deducting two years property tax at one time. If the
penalty for late returns is 10% and your marginal tax rate
(state + federal) is 30% you've made 20%. (check with your
local tax authority to be sure of penalties, etc.). My
property taxes are due in two parts, I need default only
on one part to double up deductions.

If you are paying state estimated taxes, then in the year you
are itemizing make all 4 payments (don't leave the 4th payment
till January of the following year - the year you will be
taking the standard deduction). Even more interesting, on
the last day of the year that you will be itemizing that
the post office is open, mail the total state payment for the
next years estimated taxes. That payment arrives at state
offices in the correct year, but the IRS has a funny rule
that your deduction is in the year mailed, so you deduct
2 years state taxes in one year (curious to see what other
posters say about that!). Alternately, treat estimated
taxes the same as property taxes, above. Do the math about
penalties and if you show a profit, skip the 1st three state
estimated payments in the year you take the standard
deduction, make the full payment at the time of the 4th
payment in January of the following year.

If state taxes are being withheld, adjust withholding to
the minimum allowed in the year you take the standard
deduction. More in the year you itemize (but not too much,
in general you never want to get a state tax refund,
always arrange to owe a little at filing time).

If you are able to deduct medical expense, remember that
you deduct in the year payment is made. So in a year that
you will are taking the standard deduction, delay year end
payments until January 1st of the next year. In the year
that you are itemizing, for year end services that will
not be billed until the following year - make your
estimated copayment before leaving the office. Have any
annual exams? Schedule them for January and December of
the year you itemize, none in the year you take the
standard deduction. Every 6 Months? Jan, July, Dec of
the year you itemize, July of the year you take the
standard. Note that these strategies work towards meeting
the 7.5% cut too. Obvious that elective procedures are
scheduled for itemizing years, non-elective procedures
near year end can sometimes be scheduled for either year
so pick the itemized year. Load up on Rx's in December
of the year you itemize.

Buy your cars in January. State taxes paid with registration
can be paid in December when you get the the bill or
in January. So in the year that you itemize, you pay that
years registration in January, then in December you pay
next years registration. Itemizing 2 years registration.

By now you've got the idea - look at every itemized deduction,
you want nothing one year and everything the following year.

And if doubling up doesn't make it, go for every third year.
In the year you itemize, gather deductions from the prior
year and the following year.

dick w

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This year, with the increase in the standard deduction for
joint filers, I can no longer itemize. Are there any
expenses traditionally on Sched A that I can claim
elsewhere?? (eg: Form 2106, property taxes, CONTRIBUTIONS,
etc.)??

Mel

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