@mh0520 wrote:
@KathrynG3
The paid-in-full data that I see in the documents for the original loan is 4/6/2020. Can I also deduct for 4/2020 or should I base it on the closing data for the new loan?
Thanks again for your responses.
That's unclear.
First, I think I need to make another correction/clarification. According to publication 936, you can deduct the prepaid insurance beginning the month the insurance was obtained. This means that if you closed on the new loan on April 6, then you can deduct 9/84ths this year, since the insurance was obtained in April even though your first payment was May or June. (This is something I had not realized before, and found while researching your other question.)
Special rules for prepaid mortgage insurance.
Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.
Regarding how much you can deduct from the old mortgage, the question is can you deduct 3/84th (January, February and March payments), or can you deduct 4/84ths (including April). Publication 936 does not specify or give an example that covers this situation. The actual law just says "shall be treated as paid in such periods to which so allocated" and publication 936 just says "the stated term". So I think the proper amount of the PMI to deduct in 2020 for the old loan is 96 days worth, since you held the loan for 96 days before it was paid off. 7 years x 365 days is 2555, so you would deduct 96/2555 of the prepaid premium on the old loan, slightly more than 3 months worth.
