House Repossession Assistance

Question by Nino G: Can I deduct the mortgage interest that I paid on Jan 1, 2008 but is for Dec since mortgage is paid arrears?
I need some clarification on this matter.

I know mortgage payments are paid in arrears. Meaning the payment due on the first (ex: Jan 1) is actually for mortgage principal and interest accrued on the previous month (ex: Dec).

So for tax purposes, can I deduct the mortgage interest that is reflected on my Jan 1 payment but is NOT reflected on my 1098 that I received from the lender? Basically I believe the amount on the 1098 is short of one month’s interest…

Thanks!

Best answer:

Answer by Spock (rhp)
no

individuals are cash basis taxpayers and you can only deduct what you actually paid out, not the amounts accrued.

you’ll make it up at the end of the mortgage or when you pay it off.

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a business entity that is an accrual basis taxpayer could do this.

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NB: if you bought the house in 2007, look at your settlement statement [HUD-1 form] and see if you paid interest and/or property taxes on that form related to the period when you owned the house. this would happen if the seller prepaid the property taxes, for example, and you reimbursed him for the portion related to the period when you own the house instead of him owning it.

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