Mortgage insurance premiums

[AccTaxMan]

I know the deduction of mortgage insurance premiums can get tricky if it is a up front payment which covers a few years. I think in that case the taxpayer cannot deduct the full amount in the first year.

How do we determine whether it is a up front payment? You know when you ask the client such question, more often than not they will tell you they do not know. So if an amount is entered in box 4 of the Form 1098, is it safe to assume that the it can be fully deductible in the current year?

[taxea]

you have the client as the person that closed the mortgage.

[Gretel]

I know the deduction of mortgage insurance premiums can get tricky if it is a up front payment which covers a few years. I think in that case the taxpayer cannot deduct the full amount in the first year.

How do we determine whether it is a up front payment? You know when you ask the client such question, more often than not they will tell you they do not know. So if an amount is entered in box 4 of the Form 1098, is it safe to assume that the it can be fully deductible in the current year?

I would think that any amount reported on form 1098 is for current premium. Prepaid MIP should be reflected on the settlement statement, and is a rather huge amount. It needs to be amortized over 7 years, I think.

[dan doshan]

I would think that any amount reported on form 1098 is for current premium. Prepaid MIP should be reflected on the settlement statement, and is a rather huge amount. It needs to be amortized over 7 years, I think.

One would think so but ... I have seen very large amounts reported on form 1098 that could not possibly be a total of monthly premiums paid for the year. Quite frankly I have no idea where or how such large amounts came about. For example I had a client where the MIP reported on the 1098 was around 3400 dollars. Yet the detail showing escrow payments indicated around 35 dollars a month being applied to MIP. Note that this was not VA or RHA or whatever. Just normal MIP.

Also many of the MIP's we see are in regards to homeowners that refinanced for much higher mortgages. The excess of which was not used to improve the home, but just for extra cash to pay bills or whatever. That portion of the MIP would not be deductible. The client I referred to above had a mortgage balance of around 65K but they refinanced for around 100K.

[JG EA]

Have the client give you the statement that comes with the 1098 that show the payments made during the year and then you can see that the mortgage insurance was paid also.

[Gary2]

It's always desirable to look at the HUD-1 for any purchase. It will identify the prepaid MIP, among other useful details.

It's been so long since I've refinanced, I forget whether it's done on a HUD-1 or some other document, but the same applies.

This goes double in cases where the mortgage is sold within weeks, or when the next tax bill is due with one or two months of closing. When the closing agent pays a tax bill directly, the taxes paid won't show up on anyone's 1098.

[AccTaxMan]

It's always desirable to look at the HUD-1 for any purchase. It will identify the prepaid MIP, among other useful details.

I have the HUD-1. Can you tell me where do I look in order to identify the prepaid MIP? It just says "Mortgage insurance premium FHA to ABC Mortgage, LLC". And the amount is over 4k. It does not say anything about the period that this payment will cover.

[Gary2]

I have the HUD-1. Can you tell me where do I look in order to identify the prepaid MIP? It just says "Mortgage insurance premium FHA to ABC Mortgage, LLC". And the amount is over 4k. It does not say anything about the period that this payment will cover.

I'd treat it as all prepaid MIP, amortized over 84 months (or the life of the mortgage if less).