PMI on reverse mortgages

[origun]

Taxpayers have a 1098 which shows over $7500 of Mortgage Insurance Premiums paid in 2009 when they took out a reverse mortgage. Am I correct that this isn't deductible as it is not acquisition indebtedness? ($7000 was an upfront charge when reverse mortgage was set up and the rest was a monthly premium of about $90/mo.)

[snowshine]

Is this even possible? My understanding of reverse mortgages is that there are fees and a small insurance coverage for the lender but that no payments are actually made until after the borrower dies (I guess the lender can slap a small monthly fee on the thing.) That $7000 payment might be points that need to be capitalized but I can't see how they are possibly PMI.

[Burke]

I just read somewhere recently that you cannot deduct this on a reverse mortgage but I cannot remember exactly where. I think it may have been at an Estate Planning seminar I went to on 3/16. In any event, it doesn't make sense since the homeowner is not paying anything. He is receiving funds from the lender.

[origun]

Yes, it is possible!!! I saw with my own eyes!

It was on a very official looking 1098 from Bank of America.
Box 1: zero mortgage interest paid
Box 4: A number closer to $8k than $7k--don't recall exactly--as mortgage insurance premium

I questioned clients later and they paid nothing up front. It was deducted from proceeds of the transaction. I am concluding from what you people have said and what I have found elsewhere that it is not deductible...I just wish I had an official looking ruling to show them; they assumed since it was on an official IRS form that it was deductible.

[JON]

Mortgage insurance

deduction is for home "purchases" after a specific date 2007/2008?... Would love to here why the preparer of that 1098 put it in. If you find out why it is there let us know.

[Burke]

From IRS Pub 936: "You can treat amounts you paid during 2009 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt, and ....issued after 2006. Then you have to go to page 8, under Home Acquisition Debt, which says "home acquisition debt is a mortgage you took out.... to buy, build, or substantially improve a qualified home.... Therefore, by reasoning, a reverse mortgage cannot qualify under these terms, IMO.