Pmi

[peggysioux]

Have a taxpayer that has a 1098 for $200 but PMI for $4000. Taxpayer also has another 1098 showing interest and $1100 in PMI. The PMI is $100 per month. Why would the PMI from 1st mortgage be so high if they taxpayer had 1st mortgage company for such a short time? I don't see that there is any limit on PMI but it just seems so high, I thought I might be missing something. Input appreciated.

[Gretel]

I believe the PMI from the first mortgage company was what was charged at closing and is prepaid PMI. This PMI is not deductible in full but needs to be prorated over 7 years or the mortgage term whatever is lower.

[peggysioux]

Pmi

Thanks Gretel, very helpful!!

[PIGLEE]

Thanks also, I had someone pay the PMI all up front, with cash, and I was wondering what to do with it. I am still waiting for the 1098

[peggysioux]

Pmi

Gretel, can you tell me where I can find documentation stating that PMI needs to be spread over a seven year time period. I completed return spreading over the seven year time period and gave return to client (client did not want to e-file). I just received a phone call from taxpayer today telling me he wants his fee refunded because he took his return to H&R Block and they deducted the full PMI rather than prorating over a seven year period thus getting him a larger return. I guess I should just refund his money, but I would like to show him that what he submitted was incorrect. I am annoyed..........

[Gretel]

I am sorry to hear this. I the Deluxe TTB it's on pg 4-10. see also Notice 2008-15.

[peggysioux]

Pmi

Thanks Gretel. Just curious, would other tax preparers return fee if return was done correctly?

[BP.]

TTB 4-10 & Pub 17, p. 160 both have the info you are looking for. But it is only the part of PMI that represents a prepayment allocable to future periods that is amortized. Sometimes there is an upfront PMI charge, then monthly charges over some period of time. If there are continuing monthly payments of PMI, then I prob wouldn't consider the intitial charge a "prepayment."

[Gretel]

That is not a good assumption. My son had both, prepaid PMI of several thousand dollars on his closing statement (and yes, I confirmed with him that this was all prepaid to lower future monthly payments) plus $100 monthly PMI with each mortgage payment.

[Gretel]

Just curious, would other tax preparers return fee if return was done correctly?

No, I would not. Either way he will talk bad about you whenever the issue comes up. You might as well keep the fees.

[Bert73]

Also, from the IRS website Publication 936

Special rules for prepaid mortgage insurance.

Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term.
This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.


I think the last statement is where Block was coming from, or the Block employee didnt know what to do with it, until the pop up came up on the program about PMI and they just included the whole thing.

[BP.]

This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.

And according to Pub 17, if VA or RHS, fuly deductible. (Insert exasperated sound here . . . )

[BP.]

That is not a good assumption. My son had both, prepaid PMI of several thousand dollars on his closing statement (and yes, I confirmed with him that this was all prepaid to lower future monthly payments) plus $100 monthly PMI with each mortgage payment.

Good point, Gretel. Thanks!