Are FHA Mortgage Insurance Premiums Tax Deductible?
Measuring the value of money spent and time invested also means getting to know your tax situation better. Could a better understanding of the tax implications of homeownership save you money at the end of the year?
Thanks to legislation, some borrowers are able to take a federal tax deduction for FHA mortgage insurance premiums. According to the FHA official site, FHA loan applicants who closed their transactions between 2007 and 2010 may be eligible to do so--based conditions as stated in IRS rules.
According to the FHA official site, "Legislation was recently passed to make FHA mortgage insurance premiums paid on FHA-insured loans tax deductible, subject to conditions. Purchase and refinance transactions closed between 2007 through 2010 may be eligible for the deduction. To determine eligibility for the mortgage insurance tax deduction, borrowers should contact the Internal Revenue Service or consult with their professional tax preparer."
Checking with the IRS official site at www.IRS.gov, you'll learn, "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."
Reference that with another IRS rule which says "Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan."
Borrowers may be allowed to deduct such interest (including FHA mortgage insurance premiums as described by IRS rules) when they have filed a Form 1040 and itemized deductions. The mortgage must be "a secured debt on a qualified home in which you have an ownership interest."
There is more detail on what the IRS will allows when it comes to mortgage insurance deductions on FHA mortgage insurance here: http://www.irs.gov/publications/p936/ar02.html
Always consult your tax preparer or the IRS before attempting to claim new deductions to get the full explanation of how to file and the possible tax implications of claiming the new deductions. You may need to file an amended return or complete other IRS paperwork to claim your deductions in some cases--your tax professional can best advise you on the specifics of your individual circumstances.
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