I own my home. What can I do to reduce my taxes before the year ends?

Owning your own home generally gives you two great income tax deductions:

  • Mortgage interest paid
  • Property taxes paid

Since you write the check, you're usually in control of when these payments are made. If your mortgage payment is due January 1, 2011, you'd normally probably mail the payment in January. Well, if you mail the payment on December 24, 2010 (a week early), the interest associated with this payment will be reported on your Mortgage Interest Statement (Form 1098) in 2010, and you'll be able to deduct the extra interest on your tax return a year earlier.

Your property taxes are generally due February 1. If you make this payment in December the year before, the property tax payment will be deductible a year earlier. However, for property taxes, you have to be careful. If you pay alternative minimum tax (AMT), then paying property taxes early will not help you. Learn more about AMT.

Note: You are merely moving a deduction that would normally occur in 2011 into 2010. Also, if you will be in a higher tax bracket the next year, it might well be more beneficial to take the deduction in the year you are in a higher tax bracket.