Posted on: 21st Jan, 2010 01:55 am
I also had a question. I also read about the lump sum applying to years after the year incurred not being deductible at once but over a period of time. Though the upfront MIP was financed into the loan, it does NOT cover any years after--as a previous poster said, it was a "threshold" just to get the insurance--you then "pay as you go".
I was thinking about the aspect of financing it into the loan so it's not actually paid in the year--however you did incur it in that year and are now legally responsible for it. I don't know if that would be that much different than going to the bank to take out a personal loan for that amount and pay it, essentially you just took a loan out to pay it, you wouldn't say that you paid it over the course of years in that situation right? You would have paid it then and had a loan in that amount to repay to a bank/lender.
Again, if it applies to a year after the current year it looks like you have to divide by the 84 months or less, but this is a premium charged to get the insurance, which you'll then be paying for totally separate monthly premiums for.
So, I think the safest thing is probably to let your accountant/tax preparer decide, but would love to get anyone's thoughts on this who has done more research than I!
Thanks!
I was thinking about the aspect of financing it into the loan so it's not actually paid in the year--however you did incur it in that year and are now legally responsible for it. I don't know if that would be that much different than going to the bank to take out a personal loan for that amount and pay it, essentially you just took a loan out to pay it, you wouldn't say that you paid it over the course of years in that situation right? You would have paid it then and had a loan in that amount to repay to a bank/lender.
Again, if it applies to a year after the current year it looks like you have to divide by the 84 months or less, but this is a premium charged to get the insurance, which you'll then be paying for totally separate monthly premiums for.
So, I think the safest thing is probably to let your accountant/tax preparer decide, but would love to get anyone's thoughts on this who has done more research than I!
Thanks!
Hi sf,
If you make a lump sum premium for mortgage insurance and you want to claim deduction, you will have to determine the amount of the premium you have paid in a particular year for which you are claiming the deduction. The lump sum mortgage insurance is allocated over a maximum period of 84 months. The deductible insurance premium per month can be found if you divide the lump sum you paid by 84 months. Now, if you have owned the property for 12 months in that year, your deductible MIP for that year can be found by multiplying deductible insurance premium per month by 12. This is applicable for FHA insured mortgages as well as private mortgages.
However, for VA and USDA loans which require you to pay a funding fee and a guarantee fee, you can deduct the entire lump sum amount of the insurance premium in the year it was incurred. It is always better to discuss this with an account or a tax professional as he would be the right person to guide you in this matter.
Thanks,
jerry
If you make a lump sum premium for mortgage insurance and you want to claim deduction, you will have to determine the amount of the premium you have paid in a particular year for which you are claiming the deduction. The lump sum mortgage insurance is allocated over a maximum period of 84 months. The deductible insurance premium per month can be found if you divide the lump sum you paid by 84 months. Now, if you have owned the property for 12 months in that year, your deductible MIP for that year can be found by multiplying deductible insurance premium per month by 12. This is applicable for FHA insured mortgages as well as private mortgages.
However, for VA and USDA loans which require you to pay a funding fee and a guarantee fee, you can deduct the entire lump sum amount of the insurance premium in the year it was incurred. It is always better to discuss this with an account or a tax professional as he would be the right person to guide you in this matter.
Thanks,
jerry