No the VA funding fee is mortgage insurance.  Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. If provided by the Rural Housing Service, it is commonly known as a guarantee fee. The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. These fees can be deducted fully in 2016 if the mortgage insurance contract was issued in 2016. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 5 of Form 1098.