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r8ders99
Returning Member

VA Funding Fee

What if my mortgage company didn't put the funding fee in box 5. Can I just enter it in the same 1098 when I enter it on TurboTax or do I need a corrected 1098? 

4 Replies
Opus 17
Level 15

VA Funding Fee

Since the VA funding fee is deductible as mortgage insurance, in full when the loan is made, it should be fine to add it to the 1098 interview, since Turbotax does not provide a separate place to enter mortgage insurance.

 

Another option would be to enter it separately. When I bought my house recently, the loan was made by "ABC home lenders" and sold to "XYZ bank".  The 1098 came from XYZ bank and did not include the daily interest I paid from the date of closing to the end of the month, or the property tax adjustments that were shown on my closing statement.  So I entered the 1098 for XYZ bank, and the listed a second lender as ABC bank and reported the closing interest and property tax adjustment (and checked the box for "I did not get a 1098 from this lender").  If your situation is similar, you could list the closing interest adjustment and tax adjustment, along with the VA funding fee, as a separate lender. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
r8ders99
Returning Member

VA Funding Fee

I am not seeing the area to click that "i did not receive a 1098 from this lender". The only thing close is before the 1098 info says "The seller is financing this loan and we didn't receive a 1098." But the seller is not financing the loan. Just the VA funding fee is paid directly to the VA. 

Opus 17
Level 15

VA Funding Fee


@r8ders99 wrote:

I am not seeing the area to click that "i did not receive a 1098 from this lender". The only thing close is before the 1098 info says "The seller is financing this loan and we didn't receive a 1098." But the seller is not financing the loan. Just the VA funding fee is paid directly to the VA. 


It seems they've changed the interview questions.  You can either add it to the existing 1098, or enter it as a fake 1098 in the name of the closing bank.  In the end, it's just a dollar amount that gets reported on schedule A.  If the IRS wants documentation, they will send a letter, and there isn't anything you can do at this stage to provide the documentation to avoid that. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
topcattheresa
New Member

VA Funding Fee

Hello @r8ders99 ,

we are at a loss as to where to go for an answer because the IRS help line is not helping us. We appreciate any help you might be able to provide or where to go to find the answer? 🙂
 
We built our new home in Black Forest Colorado and have a VA loan for our home which was completed last year (2020) and when the rates dropped dramatically, we refinanced again with the VA. There are very large funding fees involved which can be used as s deduction on our taxes as "mortgage insurance". However, when i go to start our taxes on Turbo Tax they use a previous year calculation that won't allow us to deduct the VA funding fee. When i called Turbo Tax they said that they are waiting for some updates from the IRS. 
I did more research and found these publications that in my eyes are not 100% clear. So i reached out directly to the IRS and after going back and forth with my question, they gave this statement-

Note: Please refer to " Qualified mortgage insurance" on page 8 as this is all the information we have available at this time. 
 
that update Turbo tax may be waiting for of 2020- 936 https://www.irs.gov/pub/irs-dft/p936--dft.pdf.
 
Both of these IRS publications state that "you can treat amounts you paid during 2020 for qualified mortgage insurance as home mortgage interest". Additionally, it states "Qualified mortgage Insurance provided by the Department of Veterans Affairs is commonly known as a funding fee and can be deducted fully in 2020 if the mortgage insurance contract is issued in 2020.
 
I cannot get the IRS to 100% clarify if the publication(s) truly affect our VA loan deduction. There has been so much in the news over the past few years about helping veterans that i have to wonder if there is a way to be able to deduct it as the publication says and avoid the Limit on Deduction of "If your adjusted gross income on Form 1040 or 1040-SR, line 11, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated"

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