Mortgage Insurance Premiums-Refinance

[zeros]

Am I correct in saying that the premiums are only deductible on acquisition cost and not premiums made to refinance?

[New York Enrolled Agent]

Am I correct in saying that the premiums are only deductible on acquisition cost and not premiums made to refinance?

Acquistion debt can include refinancing debt. They are not mutually exclusive.

§163(h)(3)(B)

(B) Acquisition indebtedness.

(i) In general. The term “acquisition indebtedness” means any indebtedness which—

(I) is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and

(II) is secured by such residence.

Such term also includes any indebtedness secured by such residence resulting from the REFINANCING of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

[Corduroy Frog]

Laymen's Terms

NYEA is his usual helpful and authoritative self.

I would like to carry his answer out of the realms of theory and into use in an example.

Shmucko borrowed $150,000 3 years ago with prepaid PMI of $3500 on his closing statement. He has successfully deducted amortization if $1500 over last three years, leaving $2000 unamortized. He owes $141,000 and refinances this amount in Year 4. This time, there is $2800 in prepaid PMI on his closing statement.

How much amortization is he entitled in Year 4?

[solomon]

NYEA is his usual helpful and authoritative self.

I would like to carry his answer out of the realms of theory and into use in an example.

Shmucko borrowed $150,000 3 years ago with prepaid PMI of $3500 on his closing statement. He has successfully deducted amortization if $1500 over last three years, leaving $2000 unamortized. He owes $141,000 and refinances this amount in Year 4. This time, there is $2800 in prepaid PMI on his closing statement.

How much amortization is he entitled in Year 4?

§1.163-11t(a)(2)

Limitation. If a mortgage is satisfied before the end of its stated term, no deduction as qualified residence interest shall be allowed for any amount of the premium that is allocable to periods after the mortgage is satisfied.

Keep in mind if loan is rural housing or VA then all is written off in year incurred - thus no amortization on those loans.

[BOB W]

§1.163-11t(a)(2)


Keep in mind if loan is rural housing or VA then all is written off in year incurred - thus no amortization on those loans.

I found out something the hard way> VA funding Fee's deduction is limited by income or reduced to $0 if income is too high. Usually the 1098 Box 4 is filled in.