The annual meeting with the accountant usually brings the same initial reactions:

If I really made that much money, where did it go? And, I must be forgetting to deduct something major.

For many members of the baby boom generation, the answer to the first notion always seems to be children and college tuitions. The solution to the second rarely surfaces, yet this year our logical CPA brought up a subject I embarrassingly overlooked.

“You’ll be getting some help for that refinance you made in 1995,” Mr. Hostek said. “Your credit remaining should be in the $700 range.”

What many home sellers – especially seniors – forget to factor in at tax time are the fees remaining from a previous refinance. All of those fees can be deducted in the tax year you chose to refinance a second time.

In our case, we had chosen a no-fee loan just before the end of the year. Rates were coming down, I did not want to gamble the fall would continue, so we chose to cash out our old loan before the holidays. Because we did not pay a fee to get the loan, I forgot what fees we had paid to get our last mortgage.

And, those fees are significant. For example, let’s say you jumped at a 30-year, fixed-rate loan at 6.50 percent in February 1998. In order to get that lower, you had to pay at least 5 discount points. If the loan amount were $80,000, one discount point would amount to $800, and five points would be $4,000. Points paid to buy, build or improve your principal residence can be deducted in the year they are paid, as long as they were not rolled into the loan amount.

However, because you refinanced to simply obtain a lower interest rate, nearly all of the $4,000 must be written off over the life of the loan. That’s because the IRS sees refinancing points as repayment of existing debt.

Last year, however, an unexpected need to send Mom into a nursing home necessitated another refinance to pull some cash out of the home. You decide on an adjustable-rate mortgage with a very low starting rate and pay no fees. Now that the existing loan is paid off, the remaining balance of the $4,000 from the previous loan is deductible in tax year 2001.

If you did refinance last year, double-check your numbers. You can only deduct interest on the amount of the loan at the time you refinance, plus $100,000. For example, let’s say you purchased your home 20 years ago for $100,000 and took out a loan for $80,000. Since then, you have paid the loan down to $20,000.

The house is now worth $275,000 and your oldest child now needs college tuition. The house definitely has equity to tap, but your mortgage interest deduction would be limited to the first $120,000 ($20,000 old loan at the time of “refi,” plus $100,000).

According to the accounting firm of Ernst & Young, any cash paid toward a remodel will be considered part of the home’s cost and acquisition indebtedness. That means the value created by reshaping bedrooms, garages, dens or adding an extra room can be added to the entire cost basis of the home when you sell.

And, E&Y suggests replacing personal debt with mortgage debt to the extent possible. That’s because interest expense on mortgage loans is usually deductible while consumer interest is not. While it might be a hassle to shop for loans, home-equity lines of credit are easy. Competitive programs are probably available with the lender who has your checking and savings accounts.

Remember that tax planning is a year-around process. It’s best to continually collect your receipts and start your focused push toward April 15 as soon possible. If you need to form a different strategy, talk it over with your partner as soon as possible. This allows you time to take advantage of strategies that may take several months to implement.

In our case, that would mean spending less – and saving more.

And those kids – consider giving gifts to your children and grandchildren. You may want to shift income to them since children are usually in lower tax brackets and so pay less in taxes. However, if your children are under age 14, their income above certain levels will be subject to the special “kiddie tax” rates.

Shifting gifts to the children? Isn’t that where it all went in the first place?

Tom Kelly, former real estate editor for the Seattle Times, is a syndicated columnist and talk show host. Send questions, comments and concerns to news@tomkelly.com.