Can you deduct upfront mortgage insurance premium

That protects the lender against loss if you walk away from your debts. Like mortgage interest, the insurance is a tax write-off, but not always in the year you pay the premiums. When you pay a monthly premium for mortgage insurance, you deduct your total insurance payments for the year on the year's taxes. If, say, you close this year and pay off all the premiums for the year at closing, those are deductible this year. If you pay a premium for the entire policy at closing, for example if you pay an upfront mortgage insurance premium through the FHA, you deduct it gradually over 84 months -- seven years -- or the life of the mortgage, whichever is shorter.

For example, in Texas PMI can range from 0. The cost depends on several factors, including the type of loan, down payment amount, loan term and your credit, according to the Texas Department of Insurance. PMI, along with other eligible forms of mortgage insurance premiums, was tax deductible only through the tax year as an itemized deduction. But with the passage of the Further Consolidated Appropriations Act, , Congress extended the deduction through Dec.

The mortgage insurance premium deduction allows you to deduct amounts you paid during the tax year or that applied to the tax year if you prepaid. Adjusted gross income is your gross income all the income you receive in a year minus adjustments.

AGI is the basis for calculating your taxable income, which in turn determines your tax bracket and tax rate. Learn more about AGI. In January , Rep. Julia Brownley, D-Calif. The bill proposed to not only extend the mortgage insurance premium deduction permanently but also to apply it retroactively to the tax year.

Another bill introduced in the Senate, called the Tax Extender and Disaster Relief Act of , proposed to treat mortgage insurance premiums as qualified mortgage interest through the tax year.

But the bill that actually extended the deduction is the Further Consolidated Appropriations Act, , introduced by Rep. Bill Pascrell Jr. Congress extended the deduction retroactively to cover , along with and So if you qualify for the deduction in , you might be able to file an amended return to claim the deduction and its savings. Doubt that would be a flag for the IRS, since thousands of taxpayers do that.

But keep your records showing the upfront payment and the payments. I need clarification on this I received a from my lender with our mortgage insurance premium and then received a substitute from our old lender that has a much larger mortgage insurance premium number on it. Am I supposed to add the two numbers together? Then it makes the amount a lot higher than what I paid last year and I don't want the irs to question it.

Same lender or two different lenders? Two different. We had one mortgage company and refinanced to another one and they sold it to a different one. So I got a from my mortgage company and I got another from the mortgage company after we refinanced and then I got a substitute from the company we refinanced with. The substitute is the one with the very high mortgage insurance premium number. For this situation with multiple PMI amounts due to a refinance and then a sale to another loan company, I would contact the company directly to see how the PMI on the with the high amount was calculated.

The amount of PMI from the original mortgage company before the refinance should be correct and would not think that amount would be rolled over into the you received from the original refinance company or the substitute Will I get in trouble with the irs if I don't do anything about the mortgage insurance premium amount from the substitute?