Mortgage Insurance Premiums

[JRHELGASON]

Taxpayer purchased new home in 2007 with new loan. Paid $ 878 in mortgage ins. premiums but not reflected in Mortgage Co 1098, Box 4. PMI is paid monthly from escrow. Don't know why not included in Box 4 - Mortgage Ins premiums. Loan was sold during the year. I'm thinking this qualifies and is deductible.

[taxea]

Mortgage Insurance Premiums

According to IRS rules, the portion paid in 2007 is deductible as interest in 2007 taxea

[solomon]

Perhaps some allocation is necessary - look up Notice 2008-15.

[veritas]

I'm brininging this one back up

Because the instructions in TTB, Schedule A Instructions and Quickfinder are too limited. The notices probably came out after publication.

Thanks for the heads-up solomon.

Twice I have come across clients who have paid mortgage insurance in 2007 but both were prepaid.

In the case of mortgage insurance other than that provided by the Veterans Administration or the Rural Housing Administration, taxpayers are generally not permitted to deduct prepaid mortgage insurance. Instead, any amount paid by the taxpayer for qualified mortgage insurance that is properly allocable to any mortgage the payment of which extends to periods that are after the close of the tax year in which the premiums are paid is chargeable to capital account and is treated as paid in the periods to which it is allocated. No deduction is allowed for the unamortized balance of the account if the mortgage is satisfied before the end of the term. Code Section 163(h)(4)(F). However, the IRS has provided transitional relief for 2007 allows taxpayers to treat certain amounts of prepaid mortgage insurance as deductible qualified residence interest. Under this guidance, in the case of an individual who, in 2007, obtained a mortgage qualifying as acquisition indebtedness on a residence and, in connection with that mortgage, paid 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 the stated term of the mortgage or 84 months (beginning with the month in which the insurance was obtained), to determine the amount treated as deductible qualified residence interest for 2007. Notice 2008-15, 2008-4 I.R.B. 313.