Mortgage Insurance is Deductible in 2012

By February 11, 2013 Individuals

Are you confused about whether or not your mortgage insurance premiums are deductible for 2012?  Even if your mortgage interest statement, Form 1098, doesn’t state it; those premiums ARE deductible for 2012.

At the time that the IRS designed the 1098, they did not include a box to report mortgage insurance for 2012 because it wasn’t officially deductible.  However, the deductibility for qualified mortgage insurance was reinstated as part of the American Taxpayer Relief Act, signed into law on January 2, 2013.  Some mortgage companies elected not to reprogram their computers to include mortgage insurance due to the cost and timing of the change in the tax law, so check your mortgage escrow statements carefully in order to determine if you paid premiums in 2012.  The mortgage insurance premiums box will be present on the Form 1098 in 2013.

Qualified mortgage insurance is typically required on the purchase of a principal residence where the borrower cannot put down a large enough down payment (usually a 20% down payment is required in order to avoid paying mortgage insurance).  After enough principal is paid on the mortgage, the insurance premiums cease as the loan no longer requires insurance.

Our staff are well aware that the figures may not be available on 1098s and will be requesting additional documentation if they believe it is likely that you are paying mortgage insurance (either by virtue of prior-year tax information or the execution of new financing on your primary residence). You may need to be prepared to provide the additional documents as the tax savings can be significant.