VA Funding Fee Deduction

I converted my conventional loan to a VA Loan in 2012. I paid a funding fee for the loan. I'm getting conflicting information. I received a 1098 from my mortgage company - that VA Funding fee was listed as mortgage insurance - according to the 2011 IRS pub 936, I can claim the VA Funding fee as Interest and NOT Mortgage insurance. I need to know what to do?
  • I have a similar question.  I'm doing my 2012 taxes now, bought a home with a VA loan in 2012.  2012 version of Pub 936 hasn't been published yet.  The 1098 from the lendor is showing the amount for the VA Funding Fee as PMI.  The question I have is, since my VA Funding Fee was included with the total loan amount and not paid upfront along with other closing costs, can I still deduct it?  The 1098 doesn't make that distinction.
  • I also have this same question.  We purchased a home in June 2012 using my husband's VA loan.  The funding fee was factored into the life of the loan so amortized over a 30 year period with the original mortgage.  Do we include this as interest, mortgage insurance and if so, since it is spread over a 30 year period, do we break the funding fee down into a monthly fee and use that number as our deduction?
  • Is the VA funding fee considered as the Origination Fee?
  • Thanks so much for your answer. I never knew the VA funding fee is really mortgage insurance.
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Just read the 2012 IRS pub 936, page 8, and I read it as you can claim the VA funding fee as mortgage insurance:  "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 2012 if the mortgage insurance contract was issued in 2012. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098." http://www.irs.gov/pub/irs-pdf/p936.pdf 
  • Where on the federal form does this go? As points and amortized through the length of the loan?
  • The VA funding fee is "mortgage" insurance. You will find it under the "Your Home" section the third item down after Mortgage interest and property taxes. The mortgage insurance premium deduction allows you to deduct:

     - The premuiums paid for private mortgage insurance (PMI)
     - The fees you paid for mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, and the Rural Housing Administration
  • From the tax code.  Why is this so hard to get an answer?

    You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006.

    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. These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098.
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