Make room in your holiday budget for some year-end payments that could cut your tax bill.
Pay your January mortgage by Dec. 31 to get an added interest deduction this tax year. Don't worry about restrictions on prepaid interest. Your Jan. 1 house payment covers December occupancy, meaning the interest for that month is fully deductible if you itemize.
Another home-related payment to make early is your property tax bill. Real estate tax bills issued in the fall typically aren't due until the following year. County tax collectors, however, will gladly accept payment sooner. By paying before the end of the year, itemizers can deduct this amount, too.
And if you pay estimated taxes to your state tax collector, pay your fourth-quarter installment by the end of the year, says Bob Meighan, a CPA and TurboTax vice president. This will increase the amount of state income taxes you can deduct on Schedule A.
Remember, though, if you owe the alternative minimum tax, or AMT, then your state and local income tax and property tax deductions won't do you any good. They aren't allowed under this parallel tax system. Your mortgage interest deduction also could be limited by the AMT.