Paycheck Chronicles

Thinking it Through


In response to From USAA:  5 Ways to Save on Taxes - Before December 31st, Chris from Florida asks, "If you make your January mortgage payment in December to save on this years taxes, aren't you just shorting yourself on your 2009 taxes?"

Good question, Chris.  And you are exactly right - it's not like you can take the deduction for both years.  The USAA article doesn't fully explain that you should think ahead and decide which year is better for your particular situation.  Particularly in military families, your tax situation can be dramatically different from year to year.  Deployments, TDYs, PCSs and changes in spouses income can change your taxable income, often by a lot.  With this in mind, plan your deductible expense clumping so that you can put your deductible expenses in a year that has high taxable income.  For example, if you know that one member of your family is going to be in a tax-free combat zone for most of 2009, then it would make sense to bunch your deductions in 2008.  Of course, the opposite is also true - if your spouse is going back to work in 2009 and increasing your family's income, then save those charitable contributions for next year.

Just in case you've already followed USAA's advice and made your January mortgage payment, but now realize that your taxes will be higher in 2009, don't fret.  Depending on your mortgage company, there are some things that you can do.  Give them a call and explain the situation.  They may be able to "back out" the payment, put it into "suspense" and reapply the money in January.  I can't guarantee that it will work for you, but you've got nothing to lose by asking.  My mortgage lender has been quite accomodating with similar requests, and we regularly moved things around when I was working in mortgage banking.

Thanks for the question, Chris.  I look forward to hearing more from you - send on the questions!

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