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Level 1

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

I paid an upfront premium MPI as part of my closing costs...this is separate from what was reported as being paid on the 1098. Is any of this amount deductible? I don't understand the 'spread over 84 months' information I'm finding in publication 936. It's confusing.
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Employee Tax Expert

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

Publication 936, states that private mortgage insurance premiums must be amortized over an 84-month period. It means that even though you may have prepaid a larger amount when closing, you can only deduct the portion that is allocable for the months you paid in 2016.

Ex:  Prepaid $6000 in private mortgage premium when closing on my home on 7/1/2016. $6000/84 = $71.42. $71.42 is paid to the mortgage company with the mortgage payment for the rest of the year. You can deduct $71.42 X 6 months paid = $428.52 for 2016.

The rest of the prepaid amount is deducted in future tax years.

Note: For tax year 2017, private mortgage insurance premiums will no longer be deductible for personal residences.

[edited 1/17/2018 12:01 pm PST]

4 Replies
Employee Tax Expert

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

Publication 936, states that private mortgage insurance premiums must be amortized over an 84-month period. It means that even though you may have prepaid a larger amount when closing, you can only deduct the portion that is allocable for the months you paid in 2016. Ex:  Prepaid $6000 in private mortgage premium when closing on my home on 7/1/2016. $6000/84 = $71.42. $71.42 is paid to the mortgage company with the mortgage payment for the rest of the year. You can deduct $71.42 X 6 months paid = $428.52 for 2016.The rest of the prepaid amount is deducted in future tax years.
mt2
Level 1

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

Does that amount get added in the same line that I put the MIP amount from my 1098? If not where does it go?
Level 1

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

I have the same question. I'm assuming after you come up with the figure, you add it to the PMI payments you made that were reported in Box 5
Employee Tax Expert

Mortgage Insurance Premium paid upfront at closing on the purchase of a home

Publication 936, states that private mortgage insurance premiums must be amortized over an 84-month period. It means that even though you may have prepaid a larger amount when closing, you can only deduct the portion that is allocable for the months you paid in 2016.

Ex:  Prepaid $6000 in private mortgage premium when closing on my home on 7/1/2016. $6000/84 = $71.42. $71.42 is paid to the mortgage company with the mortgage payment for the rest of the year. You can deduct $71.42 X 6 months paid = $428.52 for 2016.

The rest of the prepaid amount is deducted in future tax years.

Note: For tax year 2017, private mortgage insurance premiums will no longer be deductible for personal residences.

[edited 1/17/2018 12:01 pm PST]