Hi Andrew,

I prepaid my monthly mortgage payments due 1/1/11, 2/1/11, and 3/1/11 by the end of 2010. My understanding is that the mortgage interest for the 1/1/11 payment is deductible on my 2010 taxes, but the interest for the 2/1/11 and 3/1/11 payments is not. Is the interest for these two payments deductible on my 2011 taxes or have I lost the opportunity to deduct it at all by paying it early? Thanks so much for your expert advice!

Marie

When you pay your mortgage, the first amount of the payment goes towards your interest, and the rest is applied against the outstanding balance.

So to keep things simple, let's say you owe $100,000 on your mortgage, and the interest rate is 6%. The monthly interest you owe on this mortgage is currently $500 calculated as: $100k * 6% / 12 months.

So if you make three payments all at once, the mortgage company will only apply $500 towards interest, and the rest will go against the outstanding balance.

So I guess you should ask the mortgage company how they will process the two checks you sent in early. Hopefully, they will apply them against the next two months, and give you credit for the interest next year. I hope this helps you out.

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