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I have two 1098s and a Settlement Statement from 2010 for my house that I refinanced.

One 1098 says says I paid $ 893.88 in MIP in box 4.
Another 1098 says I paid $ 3016.15 in MIP in box 4.

Then my settlement statement in box 206 says I was refunded $ 2289.94 in UFMIP.
It also says on box 902 that I paid $ 4909.01 in MIP for 360 months to HUD.

So how much can I claim in MIP on my 2010 taxes?

$ 3910 the total from my 1098s?
$ 8819.01 the total of the 1098s plus box 902?
$ 6529.07 the total of the 1098s plus box 902 minus box 206?

Thanks for your advice!
To Tro: are you saying the amount that was paid in daily interest, line 901 is deductible even if it’s not on a 1098?
It looks like I found the answer and that Tro is mistaken, and that I was not entirely correct either.

Here is what I found from the IRS:
http://www.irs.ustreas.gov/publications/p936/ar02.html#en_US_2010_publink1000229966

Mortgage Insurance Premiums

You can treat amounts you paid during 2010 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.

2 Thoughts on I refinanced my home last year and I have two two 1098s and a settlement statement. Can I deduct all MIP?
  1. Reply
    tro
    August 4, 2011 at 2:21 am

    you include both 1098’s for mortgage interest
    the only item on the settlement statement would be interest that was charged on your account

  2. Reply
    Michael Plaks
    August 4, 2011 at 2:57 am

    Yes, Tro is mistaken, and so are a lot of other people on this particular issue. The 1098s are supposed to include all the interest that was prepaid during closing, so no extra interest should be picked up from the settlement statement. This is not say that mortgage companies do not mess it up, they mess up 1098s all the time. But they are *supposed* to include all the relevant interest.

    However, your question was not about interest, it was about MIP. Similarly to my comments above, mortgage companies are *supposed* to include all relevant MIP on their 1098 forms, and that does include any refunds as well as line 902 which is simply pre-paid premium. So again, no extra items are supposed to be picked up from the settlement statement. If you are really into it, you can try to contact mortgage companies and request an itemized statement so you can reconcile their numbers. The problem is that, even if you find discrepancy, getting them to correct it is next to impossible. It could be a case of “the less you know, the better you sleep” – so just take numbers from 1098s.

    Now, here’re the finer points of the tax law. Sorry, you may have more issues than you want to deal with.

    1. If you had a cash-out refinance, i.e. your new mortgage is for higher amount than the old one was, then the new loan possibly no longer qualifies as “acquisition indebtedness.” If so, only part of your MIP is deductible.

    2. More bad news. You are not allowed to deduct pre-paid MIP in the year of refinance. Pre-paid MIP has to be amortized (spread over) 7 years. I included couple references, one of them is highly technical and frankly I do not recommend you read it unless you are an accountant.

    Good news: you’re very unlikely to find an accountant or an IRS agent who is THAT familiar with the details I told you, so most people are happily unaware that there is way more to the rules than meets the eye. So if you’d rather forget what you just read, you’ll be in a very large club. 🙂

    Michael Plaks, EA, Houston TX
    Real estate specialist
    http://www.MichaelPlaks.com

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