upfront MIP

Is the upfront mortgage insurance premium paid at closing on an FHA loan fully "Tax" deductible? --- Is that your question?

If yes - Yes, indeed. Your upfront MIP is tax deductible. Any PMI, taxes or insurance that appears in the HUD-1 or that you also have a record of, that is not included in the 1098, is deductable.

Mortgage insurance premiums will be 100% deductible for households whose adjusted gross income is $100,000 or less.

The tax benefit for households with adjusted gross income between $100,001 and $109,000 is based on the following declining scale:


$100,000 or less - 100%
$100,001 - $101,000 - 90%
$101,001 - $102,000 - 80%
$102,001 - $103,000 - 70%
$103,001 - $104,000 - 60%
$104,001 - $105,000 - 50%
$105,001 - $106,000 - 40%
$106,001 - $107,000 - 30%
$107,001 - $108,000 - 20%
$108,001 - $109,000 - 10%
$109,001 or more - 0%

Sorry, was not logged in. That was me above

In dec/2008 I paid $3900 upfront mortgage insurance premium. In addition I pay 101/month. My question is "is the $3900 fully deductible in 2008 tax year or do you deduct it over 84 months?"

Hey larry,

As far as I know, the upfront mortgage insurance premium will be deductible in 2008. It will not be deducted over a period of 84 months.

Where would we indicate where the upfront MIP amount on the tax return?

it's going to go on schedule a - itemized deductions.

According to research I did on the IRS website, the FHA Upfront MIP must be allocated over 84 months (or the term of the mortgage if it's shorter). So you calculate the number of months you owned the home for the year and you can deduct 1/84th of the upfront MIP per month. And then 12 months worth each year until you've used up the 84 months. If you sell the home before you can deduct the remainder, you cannot deduct the rest.

For VA or RD loans, they are deductible in the year they were incurred.

The monthly mortgage insurance is deductible in the year it was incurred in all situations.

This information is from IRS article 202593, last updated January 14th 2009.

If you google the previous sentence, you'll find the exact article I reference as the first link as of today.

well done, howard. there's so much knowledge out there to be had, if only folk would take the time and make the effort to do so. i guess that's why we exist, so we can do the work and put the word out for them, eh?

thanks for the post.

@Howard
The IRS article you cite says "If you paid a lump-sum premium for insurance provided by FHA or a private mortgage insurer that also covers years after 2008, you must determine the portion of the premium that pays for insurance for 2008 by dividing the total premium by the stated term (number of months) of your mortgage, or 84 months, whichever is shorter...."
However, I'm not sure "up-front" means the same as "lump sum", as upfront is a threshold amount to receive the insurance, but it doesn't actually pay any MIP's in the following years. So I wouldn't assume "up-front" is covered by this IRS article.
Do you have any clarification? :shock:

up-front mortgage insurance premium is typically financed in your loan. if you review your closing documents, i believe you'll find that to be the case. in that situation, assuming it's true, that would fit the definition of the lump sum premium paid.

I have an FHA loan i streamlined refinanced with the same lender.....i have two 1098 forms...i received a refund on the upfront as well....would i subtract the refund from the total upfront and divide by 84, then multiply by how many months since the loan......finally, add the remaining amount, assuming that's what i paid monthly?? CONFUSING!

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 an accountant/tax preparer decide, but would love to get anyone's thoughts on this who has done more research than I!
Thanks!

I wonder if its as simple as recording whats in your 1098, in my 1098 it includes my MIP that was financed and I would assume since its in the 1098 you can fully deduct it in the current year. When I sell my home I do not get any credit for it (as far as I know) which again basically means I am getting a loan to pay this MIP fee in order to get a lower rate (thats why you pay it for FHA, to get a 0.55% rate as opposed to 1.1%), its like paying points to lower your interest rate, in my eyes anyway.

well, ian, it's not like paying points to reduce an interest rate; it's mortgage insurance. nevertheless, you can look at it that way if you wish.

sf1030, i couldn't follow your flow at all, but at the end you made a great deal of sense. you suggested it is wise to have a tax preparer get involved and take care of the deduction and the calculations thereof. i think you hit the nail on the head. if someone wishes not to have to pay another person to prepare taxes, that person could certainly go straight to the irs to get the skinny on how to handle the mip.

I'm planning on paying my UFMIP at closing, in other words, I'm not going to finance it. In this case, would this UFMIP amount be fully tax deductible in the tax year that I paid it?

Thanks for all the solid posts.