J-Man wrote:

- quote -

Note that you have realized no benefit by making these
payments in advance. Many lenders have special procedures
for applying extra amounts directly to principal, so you
often have to ask in order to make sure this is done.

MTW

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J-Man wrote:

- quote -

No. IT wasn't interest at all, because the interest that
would have accrued never did. What you did do is lower your
principal balance faster than scheduled.

- quote -

Better? I don't see where you have a choice.

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"Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote:
- quote -

Nope. It is clearly marked by the mortgage company as
"prepaid interest," and was not included on the 1098 for
that reason. I think the reason it was not allocated to
principal was due to the fact that I made 14 equal, regular
payments, as opposed to increasing the amounts of each
payment.

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- quote -

I had the unfortunate (from a tax planning perspective)
situation where the mortgage company pulled the January 1
payment on December 31. I didn't want that deduction in
2004, rather in 2005. Oh well!

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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" J-Man" <JMan[at]yahoo.com> wrote:

- quote -

More likely, the extra payments went to reduce principal
which is never deductible.

Gene E. Utterback, EA

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The nature of "interest" is that you can only pay so much
per time unit. Anything amount beyond that is principal.
One of the mortgage years you make a extra payment a few
days early to have credited to the previous year. But this
is a one-time trick if you think it through.

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I received my 1098 from my lender last week and was
surprised to find that all of the interest I paid in 2004
was not reflected. I had been paying my mortgage payments
ahead, and ended up making 14 payments in 2004. The
interest from the last two payments is apparently considered
"prepaid interest," and thus cannot be deducted in 2004.
Two questions:

1. Can I deduct this amount in 2005?
2. Would it be better to just recharacterize any such
"advance payments" in the future as going 100% towards
the princpal? I'm not sure how to do that, since I pay
online.

Thanks for your help!

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