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blakeman-mark
New Member

Can I spread out my VA funding Fee as a deduction the same way points can be spread out using the $Amount / 84 months equation?

Our loan closed on 30 Dec 2016 and our VA funding fee was $4400.  I don't need the entire deduction this year due to my other charitable contributions, and would like to distribute the amount for future tax returns.  Is there a specific equation I have to follow (VA Fee / 84mths (7yrs)) or am I able to use whatever amount I want up until $4400 and the 7 year mark?
1 Best answer

Accepted Solutions
DianeW
Expert Alumni

Can I spread out my VA funding Fee as a deduction the same way points can be spread out using the $Amount / 84 months equation?

The IRS publication states the following:

  • Qualified mortgage insurance. 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 Homeowners Protection Act of 1998 as in effect on December 20, 2006). 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.

There is nothing that specifically states you cannot amortize the fee versus deducting it in full in the year paid. It also doesn't state you must take the fee all in the year paid.  This can be interpreted to allow you the decision to amortize.

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3 Replies
DianeW
Expert Alumni

Can I spread out my VA funding Fee as a deduction the same way points can be spread out using the $Amount / 84 months equation?

The IRS publication states the following:

  • Qualified mortgage insurance. 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 Homeowners Protection Act of 1998 as in effect on December 20, 2006). 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.

There is nothing that specifically states you cannot amortize the fee versus deducting it in full in the year paid. It also doesn't state you must take the fee all in the year paid.  This can be interpreted to allow you the decision to amortize.

blakeman-mark
New Member

Can I spread out my VA funding Fee as a deduction the same way points can be spread out using the $Amount / 84 months equation?

Thank you so Much! This is how I "interpreted" the IRS publication as well. The implication from the last sentence is that the decision to amoritize or to fully deduct is left to be interpreted as to which is more beneficial to the filer. Thanks again!
DianeW
Expert Alumni

Can I spread out my VA funding Fee as a deduction the same way points can be spread out using the $Amount / 84 months equation?

@blakeman.mark You're welcome.

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