2 years of real estate taxes?

[pksublime]

In another discussion, someone mentioned that they bunch 13 mortgage payments and 2 years of real estate taxes in a single year.

As I am already doing the former, I would like to know more about the latter.

I guess the biggest question is are you paying late and delaying paying year 1's tax until year 2? If not, how in the world do you know how much to pay? In my situation the tax statement is mailed in March for the taxes due half in May and half in October.

So if you pay ahead, do you just guess? Pay last years amount and then settle the difference? I'm really curious.

 

[Senator]

In another discussion, someone mentioned that they bunch 13 mortgage payments and 2 years of real estate taxes in a single year.

As I am already doing the former, I would like to know more about the latter.

I guess the biggest question is are you paying late and delaying paying year 1's tax until year 2? If not, how in the world do you know how much to pay? In my situation the tax statement is mailed in March for the taxes due half in May and half in October.

So if you pay ahead, do you just guess? Pay last years amount and then settle the difference? I'm really curious.

Paying an extra mortgage payment will not increase your interest deduction. You only have paid what interest is due. Your 1098 will not reflect the extra interest.

If your county will accept an extra payment, just pay what was due the year before. To delay paying taxes for a year will generate a penalty far beyond any tax savings.

I accidentally sent in an extra property tax payment and I got a refund check in about a month after it was paid.

 

[pksublime]

As to the mortgage payments, it absolutely shows up on your 1098. I've done it many times and others will back that up. As long as you're clear to your mortgage company that you are paying January's payment and not sending in an extra principal payment.

As for the taxes, yeah I think both Hennepin and Dakota counties do not accept early payments.

 

[RockyMtn]

+1 on prepaying Jan mortgage and deducting in year you actually make the payment. No more mortgage for me but did that a number of times.

On property taxes many counties bill taxes in arrears and have a payment due in October and one in March. Our county also allows full payment prior to end of the year with no interest if payment is made prior to Jan 2 of the following year.

One thing to watch...if you are subject to AMT making both payments prior to the end of the year might not be as beneficial as waiting until the following year!

 

[audreyh1]

In another discussion, someone mentioned that they bunch 13 mortgage payments and 2 years of real estate taxes in a single year.

As I am already doing the former, I would like to know more about the latter.

I guess the biggest question is are you paying late and delaying paying year 1's tax until year 2? If not, how in the world do you know how much to pay? In my situation the tax statement is mailed in March for the taxes due half in May and half in October.

So if you pay ahead, do you just guess? Pay last years amount and then settle the difference? I'm really curious.

I think it depends on the state and your deadlines. In TX we get the statement in October, and it can be paid in up until Jan 31 without penalty. So you can easily decide which year to pay it in.

 

[Sunset]

In IL, you have to request to pay early next years first installment (and it can take 45 days for them to send you the bill).

So one year we pay: property taxes for that year + approx 1/2 of next year property + donate, and Itemize our return.

Next year we just pay the remaining 1/2 property tax, and take Standard Deduction

 

[gayl]

So how will the proposed tax changes affect this?

 

[bingybear]

property taxes where I live are paid in january and june I think. The bill for January comes in late December and if you are quick you can get it credited in December. These are half year bills, but the whole year can be paid with the first bill.

So for the first year you could pay in January and the second year you pay in December of the same year.

Note you may not be able to do this if your taxes are paid thru your mortgage company.

 

[Senator]

As to the mortgage payments, it absolutely shows up on your 1098.

That is good to know, as long as it shows up on a 1098, you are good. The next year you only have 11 payments, unless you pay January's payment in December again. Then you are back to 12. Maybe do an 11/13 on alternating years and take more income?

The interest you paid in December is interest that accumulates in January.

 

[MissMolly]

As to the mortgage payments, it absolutely shows up on your 1098. I've done it many times and others will back that up. As long as you're clear to your mortgage company that you are paying January's payment and not sending in an extra principal payment.

As for the taxes, yeah I think both Hennepin and Dakota counties do not accept early payments.

Also, just to be clear, only the January payment paid in December will be reported on the 1098 that year. It is only interest which accrues in the previous year and paid in the previous year that is claimable. February payments and forward will be reported in the year they accrued the interest. AND, all the interest on the January payment had to have accrued prior to January 15. If any part of the interest accrues after January 15, then it is not claimable until the year it is accrued.

Prepaid Interest
Report prepaid interest (other than points) only in the year
in which it properly accrues.
Example.
Interest received on December 20, 2017, that
accrues by December 31 but is not due until January 31,
2018, is reportable on the 2017 Form 1098.
Exception.
Interest received during the current year that
will properly accrue in full by January 15 of the following
year may be considered received in the current year, at
your option, and is reportable on Form 1098 for the
current year. However, if any part of an interest payment
accrues after January 15, then only the amount that
properly accrues by December 31 of the current year is
reportable on Form 1098 for the current year. For
example, if you receive a payment of interest that accrues
for the period December 20 through January 20, you
cannot report any of the interest that accrues after
December 31 for the current year. You must report the
interest that accrues after December 31 on Form 1098 for
the following year.

 

[Curmudgeon]

My county sends prop tax notices in October-ish, with an option to get something like a 3% discount if you pay by November, and no discount if you make quarterly payments over the next year. I usually pay in November, and will this year as I am itemizing.

Next year, though, I'll probably consider postponing payment until the following January, thus losing the discount, but being able to deduct it in my next itemizing year.

 

[Senator]

Also, just to be clear, only the January payment paid in December will be reported on the 1098 that year. It is only interest which accrues in the previous year and paid in the previous year that is claimable. February payments and forward will be reported in the year they accrued the interest. AND, all the interest on the January payment had to have accrued prior to January 15. If any part of the interest accrues after January 15, then it is not claimable until the year it is accrued.

I think you get a years worth of interest no matter when you pay, as long as you pay 12 payments. I suspect the banks calculate it out according to the IRS rules.

 

[MissMolly]

I think you get a years worth of interest no matter when you pay, as long as you pay 12 payments. I suspect the banks calculate it out according to the IRS rules.

No. I quoted the IRS rules above. It is as I stated.

 

[mpeirce]

We've using the bunch it up strategy for a few years.

No mortgage, but we pay two years of property taxes every two years (we pay it in December, it's not due until January). We also bunch up our charitable donations. No donations one year, twice as much the next. Our CPA set us on to this.