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That's where you put 5% down (which can all be Gift Funds), and you have TWO mortgages, with two different payments. one of them is for 80% of the price, the other is for 15% of the price. This facilitates the avoidance of Mortgage Insurance.
PMI for new loans is not deductible as of tax year 2014. The breaks were not extended after 2013.
This is currently true. However, this is one of the tax breaks that have been bandied about in Congress as potential extenders. In the past, Congress has extended tax breaks as late as December for the entire year. So, while PMI paid in 2014 may not be deductible on 2014 taxes filed in spring 2015 as of May 27, 2014, that may or may not be the case on December 31, 2014. So, if the deductibility of PMI makes or breaks a decision to buy a house, don't do it.
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. 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 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.
Special rules for prepaid mortgage insurance. Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.
Yes, PMI has enjoyed a temporary tax deduction for this with an adjusted gross income ~ 100K. Each year since 2009 the deduction has been on life support, but has greatly benefitted those with incomes below 100K. I suspect though, we're about done with this little bonus.
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