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From: pumphrey@ttidcb.UUCP (Larry Pumphrey)
Newsgroups: net.taxes
Subject: Re: Re: tax deduction of prepaid mortgag
Message-ID: <445@ttidcb.UUCP>
Date: Tue, 27-Aug-85 11:17:16 EDT
Article-I.D.: ttidcb.445
Posted: Tue Aug 27 11:17:16 1985
Date-Received: Thu, 29-Aug-85 20:30:04 EDT
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The whole crux of when tax bills and payments are deductible is whether one
pays ones taxes according to the cash or the accrual system.  Probably 99%
of us pay by the cash system which means that any tax deduction is only
deductible in the year in which it was PAID.  The accrual system (and this
is acceptible by the IRS) allows one to claim a deduction in the year in
which it was DUE regardless of when it was paid.  There are some caveats
with the accrual system, but this is the general idea.  Incidentally, one
cannot bounce back and forth between the two methods on a year to year
basis.  One must select one of the methods and stick with it.  It requires
permission of the IRS to change between these 2 accounting systems.

In some years I prepay some of my deductible bills in December (property
taxes, monthly medical bills such as orthodontia, extra mortgage interest,
etc.) just for the purposes of controlling the amount of my tax liability
in a particular year.  Similarly, I sometimes let some deductible bills
go delinquent until January if the delinquency penalties can be offset by
anticipated tax savings.
						-Larry