That move insures that the dollars that my invoices generate don't arrive until next year and escape current year taxation. I ll be happy to pay later . This is the opposite side of the coin from deferring income. If you re paying state estimated tax, your fourth-quarter payment is usually due in January 2001. But if you pay it on Dec. 31, you get to deduct it this year rather than next year.
Property taxes work the same way.
My fourth-quarter property tax is due Feb. 1, 2001. By paying that on Dec. 31, I accelerate the deduction into this year. Apply the concept to your home mortgage. Your Jan. 1 payment is for the use of the money for the month of December. Pay on Dec. 31, and you have an additional month s interest to deduct if you itemize.