Mortgage insurance premiums

[POCAHONTAS]

client purchased a home in 2009 and the client's 1098INT Mortgage interest statement shows, mortgage insurance premiums of $898 but the settlement statement shows $2975 paid to HUD, so which amount do I claim on schedule A.??? or do I add both $898 and 2795 and put the total on schedule A.

Thank you

[S T]

Similar Issue

Pochahontas, not to steal your thread, but I have a similar issue on a client today.

The HUD statement shows $ 4221 paid in advance and has a 1 year notation
The 1098 shows $ 4990 (which seems to be the $4221 + 109.80 x 7)
Then I have monthly statements showing that $109.80 is being collected through the monthly mortgage payment (which is P&I, taxes and Ins) for 7 mos.

I find it hard to believe that one year's premium would be $ 4,221 and in addition they are collecting the $ 109.80 per month.

As with you, I am not sure whether to amortize the 4221 over 84 months and then add the 109.80 for 7 months, or to deduct "all"



Sandy

[POCAHONTAS]

well I posted it to another forum but no answer yet hopefully someone will know soon

[AZ-Tax]

Clients obtaining tax advice from everywhere except IRS site.

I dont have answers for either of you but I have a client who absolutely insist that his entire MIP is deductible after sending links and links about MIP to me. Then I sent him the IRS link where it list the AGI phase out amts. Hopefully that will satisfy him.

Regarding the HUD, this same client told me his title company informed him after he started questioning about the fees, some of the fees were mistakenly placed under the wrong column. If the HUD was not confusing enough.

[New York Enrolled Agent]

I think Notice 2008-15 contains information that might be of help. Obviously, I can't comment on the contents of anyone's closing statements but I would check out the notice to see if it's applicable.

One part states:
treatment of prepaid qualified mortgage insurance premiums.
In the case of an individual taxpayer who, in 2007, obtained a mortgage
qualifying as acquisition indebtedness on a qualified residence and, in
connection with that mortgage, paid (by cash or financing, without regard to
source) a qualified mortgage insurance premium for private mortgage insurance
or mortgage insurance provided by the Federal Housing Administration issued in
2007 but extending beyond 2007, the taxpayer may allocate the prepaid premium
ratably over the shorter of --
(1) the stated term of the mortgage, or
(2) 84 months, beginning with the month in which the insurance was
obtained, ...

[DMICPA]

Mortgage Insurance upon refinancing

A client refinanced His home and on the settlement statement there are Mortgage Insurance premiums and are also listed on the 1098 form for 2009.

I am thinking that these premiums paid on a refinance do not count as either amortizable or deductible because everything I read mentions "home acquisition" and not refinance.


Am I correct in this?

[Jesse]

See if this helps.

There is another discussion about refinance and home acquisition debt:

http://www.thetaxbook.com/forums/showthread.php?t=13336&highlight=home+acquisition+debt

Pub 936:
Refinanced home acquisition debt. Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later).

[Burke]

Regarding the HUD, this same client told me his title company informed him after he started questioning about the fees, some of the fees were mistakenly placed under the wrong column. If the HUD was not confusing enough.

HUD statements are notoriously inaccurate -- anyone who does not check every item on them and fully understands how the monies were disbursed should have their head examined. I deal with them all the time and invariably have to return them to the issuer for correction in real estate transactions. Last one I had, it was changed 3 times after we reviewed it. We routinely ask for a copy of it in advance of closing for just that reason.

[BHoffman]

I have a 1098 here that is showing around $8k in mortgage interest and around $4k in the box for PMI. From reading this thread, it looks like the $4k should be written off over 84 months, right?

[JG EA]

I don't know if this helps anyone, but I had one this year that reported the prepaid amount on one 1098 and on the buyer of the note's 1098 it reported the same amount plus what the taxpayer paid after refinancing. I found this out by calling. So, I reported the prepaid amount divided by 84 times over the number of months after the refi plus the amounts they paid after that time.

[veritas]

Mortgage insurance premiums

I think there are different circumstances for premiums charged. One method is for the insurer to charge one year's annual premium at closing and monthly premiums with each mortgage payment.

FHA loans charge a percentage of the loan usually around 1.5% at closing and a monthly premium going forward.

I don't have the source handy but it is my understanding that the amount charged by FHA at closing is fully deductible.

[veritas]

Here's the guy

who started the whole pita.

http://www.house.gov/ryan/press_releases/2003pressreleases/mortgage31803.html

Look who cosponsored it.