Home Buying in Sacramento>Question Details

Misty, Home Buyer in Sacramento, CA

Is the FHA Upfront Mortgage Insurance Premium financed in my loan tax deductible?

Asked by Misty, Sacramento, CA Wed Dec 31, 2008

I am aware that MIP is tax deductible at least until 2010, however, I am curious if 1) the upfront Mortgage Insurance Premium (required for FHA loans) is tax deductible and 2) is it tax deductible even if you've financed it through your loan? When can I claim the entire couple thousand dollar Upfront MIP on my taxes? Can anyone link me to a website that explains this or to someone who might know the answer to this question?

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I'm pretty confused about this too. Seems like even the professionals are not sure. Some say that if it is a prepaid lump sum then you must divide by 84 and multiply by months of year you paid mortgage. Others say deduct all in year paid.

Now the latter sounds best to me :) But the reasoning is sound also. With the divide by 84 method that refers to private mortgage insurance where you are paying the entire premium, with no monthly payments after. For FHA loans there are two payments, the Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Payment (UFMIP). The MIP is the monthly payments made after.

Now, after some research I found that years ago there would be a refund if mortgage was terminated within 7yrs (84 months :) Then it was reduced to 5yrs. Then it was stopped altogether unless it was refinanced with another FHA, and that was only up to 3yrs.

So...as I see it, it is a one time payment for mortgage insurance and I will deduct in the year it was paid regardless of whether I financed it as it was still paid. Just like I will pay for my insulation on credit card but still claim it for this year.
0 votes Thank Flag Link Tue Dec 28, 2010
One person told me (who is not a CPA, but works for a tax preparing company) said that whatever it says in box 4 is what the IRS will see on their paperwork so they won't care.

Another person (who is a CPA) said that you have to divide the financed portion by 84 then multiply by the amount of months you had the house. Plus add the individual monthly payments. For example I bought my house April 24th 2009. So including April that is 9 months.
0 votes Thank Flag Link Sat Jan 30, 2010
Did anyone find an answer to this question? I too have the financed PMI and monthly PMI in box 4 and would like to know if i should enter this total amount in turbotax?
0 votes Thank Flag Link Sat Jan 30, 2010

I have the same question. Box 4 definitely has both my financed PMI and the monthly PMI for 2009 added together. Do I just enter Box 4 into Turbo Tax or subtract the upfront PMI which was financed. Or is the upfront divided by 84 and multiplied by the number of months I had the house in 2009 (I saw an example of this on the IRS website). Please let me know if you found an answer to this. Thank you.

0 votes Thank Flag Link Thu Jan 7, 2010
Ed Cook, is an excellent CPA who can answer this question. You can reach him at (916) 705-4958. I'm going to e-mail him this link to see if he'll answer here for you, but you can call him.
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Thu Jan 1, 2009
This question is for your CPA or tax advisor. Sorry, I wish i could help.

0 votes Thank Flag Link Wed Dec 31, 2008
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