@brs10 wrote:
"You can treat amounts you paid during 2020 for qualified mortgage insurance as home mortgage interest."
"Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Home- owners Protection Act of 1998..."
If you can treat VA Funding Fee as interest, why would you enter it in box 5?
Because even though the law says that you can treat qualified mortgage insurance premiums as if it was deductible mortgage interest, the IRS has established a specific procedure for reporting these amounts. On schedule A, deductible mortgage interest is reported on line 8a or 8b (depending on the kind of lender), deductible points (which are also a form of interest) are reported on line 8c, and mortgage insurance premiums are reported on line 8d.
https://www.irs.gov/pub/irs-pdf/f1040sa.pdf
And in turbotax, the way to get mortgage insurance, including the VA funding fee, to be reported on line 8d of schedule A is to list it in box 5 of the 1098.
If you add the VA funding fee to your interest in box 1, then your tax return won't match the IRS records of the 1098, and you will get a letter asking for an explanation.
