RE: 02967645 Deductibility of Mortgage Insurance Premiums on 2017 Tax Return This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Any change or addition to those facts could materially and adversely affect our analysis and conclusions, and in that event the analysis should not be relied upon. This advice was not written, and cannot be used, for the purposes of avoiding penalties that may be imposed on the taxpayer by the IRS. Summary of Request Doing a return for 2017. Mortgage Insurance Premiums .... are those to flow to the Schedule A to be included in the amount of total Schedule A Itemized Deductions? Summary Yes, premiums paid or accrued by a taxpayer on a mortgage insurance contract issued after 2006 and before 2022 for.qualified mortgage insurance.for acquisition debt on a qualified residence are treated as qualified residence interest. The premiums may be deducted as an itemized deduction on.Schedule A (Form 1040),.Itemized Deductions, for taxpayers who qualify, subject to the.AGI limitations. Rules and Analysis Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by: The Department of Veterans Affairs (DVA), The Federal Housing Administration (FHA), The Rural Housing Service (RHS), Their successor organizations, and Private mortgage insurance (PMI) as defined in the Homeowners Protection Act of 1998. Mortgage insurance provided by the DVA is commonly known as a funding fee. If provided by RHS, it is commonly known as a guaranteed fee. Either fee can be included in the amount of the loan (and amortized) or paid in full at the time of closing. Prepaid Mortgage Insurance Premiums Prepaid DVA and RHS Mortgage Insurance Premiums Subject to the AGI limitation discussed below, fees paid in the current year for a qualified mortgage insurance contract issued by the DVA or RHA in the current year are fully deductible. Prepaid FHA and Private Mortgage Insurance Premiums Prepaid mortgage insurance premiums must be allocated to determine the amount that is deductible in the current year. In general, prepaid premiums must be allocated over the shorter of:
· The stated term of the mortgage, or . A period of 84 months, beginning with the month the insurance was obtained. The premiums are treated as paid in the year to which they were allocated. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. If a refinancing is for qualified acquisition debt on which prepaid mortgage insurance premiums are paid, the prepaid mortgage insurance premiums are deductible according to this allocation method. Limitation on Deduction If a taxpayer's AGI is more than $100,000 ($50,000 if married filing separately), the amount of mortgage insurance premiums that is otherwise deductible is reduced or eliminated. The deduction is phased out completely if the taxpayer's AGI exceeds $109,000 ($54,500 if MFS). These amounts are not adjusted for inflation. See the Schedule A (Form 1040) Instructions and complete the Mortgage Insurance Premiums Deduction