Cut income tax, pay some bills now

Homeowners who want to slash their income taxes for this year should consider making their January mortgage payment now, and even writing a check for property-tax payments that are due next spring.

Q. I received a good-size bonus from my employer, but now I'm worried that I'm going to get stuck with a big income-tax bill next April. If I pay the second installment of my home's property tax now instead of waiting until it's due next spring, would I be able to deduct the amount on my 2007 return, or would I have to wait until I file my 2008 return about a year from now?

A. Rules published by the Internal Revenue Service clearly state that property-tax payments can be deducted in the year that you actually pay them. That means that you can make the payment now, even though it's not due until next spring, and deduct the amount on your 2007 return in order to reduce the taxes on your recent bonus and other income.

If you want to cut your 2007 income-tax bill even further, also consider making your January mortgage payment now instead of waiting until the new year begins. Like property taxes, mortgage-interest charges also can be deducted in the year that you pay them -- even if you write the check in December for a bill that's due the following month.

Q. What is a "puffer"?

A. In real estate, it's a rather unflattering term for a person who bids higher-and-higher prices -- thus "puffing them up" -- at a property auction.

Some developers have recently been accused of quietly hiring professional puffers to boost the prices of homes that they have sold at public auction. Builders say that the practice is a perfectly legitimate way to help cut their losses on slow-moving housing tracts, but consumer advocates claim that it's a rip-off scheme to make buyers pay thousands of dollars more for a house than they would have if the puffers had stayed out of the bidding.

Q. We are starting to plan our annual winter vacation, but our budget is pretty tight and we're trying to keep our expenses to a minimum. I have heard that some hotels offer big discounts for "out of order" rooms that they normally would not rent. Can you explain how this process works, and whether it's a good deal?

A. Sure. Many hotels often have at least one or two rooms each night that are considered "out of order" and therefore are not scheduled to be rented because they need some work to bring them back up to the owner's standards. Savvy consumers can save a lot of money on their vacation housing costs if they're willing to take one of these rooms.

For example, the last time I made plans to go to Hawaii, I asked the hotel's reservation department if they had any out-of-order rooms. I was rewarded with a two-bedroom suite for the price of a standard room simply because the hotel's remodeling program was running a month behind schedule, so the frayed drapes in the suite had yet to be replaced.

I didn't mind staying in a room with old drapes, especially because it gave my family much more space for the same price that we would have paid for a regular room with two double beds.

If you want to get similar discounts, ask the reservation desk at the hotel if they have any out-of-order rooms when you make your reservation -- or even when you check in upon arrival. If the clerk says that none are available, ask for the manager: Hotel supervisors often know about out-of-order rooms with minor problems that they're willing to rent, but usually don't post such information on the computer system that is used by clerks when they're making a reservation or checking in a guest.

Q. I heard a brief news item on the radio that said Iceland is the best nation in the world to live in. Who made this determination, and what is it based on? Where did the U.S. rank?

A. The annual ranking is based on a detailed report compiled each year by the United Nations, which looks at everything from a country's average life expectancy and educational levels to personal incomes and quality of housing.

Norway, which ranked second this year, had held the top spot for the previous six years. Australia came in third, followed by Canada and Ireland.

The United States dropped from eighth place last year to 12th in the current ranking. Our per-capita income of $41,890 was second only to Luxembourg's $60,228. But the U.N. report notes that our life expectancy of 77.9 years was tied for last place in the top 26 countries. (Japan was first in that category, with an average lifespan of 82.3 years.)

The report covers most of the U.N.'s 175 member countries. All 22 of this year's bottom slots are occupied by nations in sub-Saharan Africa, where the report says that famine, poverty and persistently high rate of AIDS sadly has pushed their citizens' average life expectancy down to a mere 41 years.

© 2007, Cowles Syndicate Inc.