Mortgage Insurance Premiums

[Jack from Ohio]

IRS Pub 336:

You can treat amounts you paid during 2007 for qualified mortgage insurance as home mort-gage interest. The insurance must be in connection with home acquisition debt, the insurance contract must have been issued after 2006, and you must have paid the premiums before 2008 for coverage in effect during 2007.

This is on the PMI-US website...

Q.

Do all mortgage borrowers using mortgage insurance qualify for the MI tax deduction? A.

Currently, this MI tax-deductibility legislation only applies to eligible borrowers with adjusted gross incomes of $109,000 or less who purchase or refinance a home between 2007 and 2010, and pay mortgage insurance premiums.

Borrower-paid mortgage insurance premiums allocable to 2007 through 2010 will be fully deductible for eligible taxpayers who are married, single or head-of-household and who earn up to $100,000. The amount of the deduction incrementally phases out for those who have adjusted gross incomes between $100,000 and $109,000 annually.

In my opinion, refinance is not "acquisition debt." Am I missing something here? Does anyone have any other references to clarify? Do you think I am in error here?

[Jack from Ohio]

IRS Pub 336:

You can treat amounts you paid during 2007 for qualified mortgage insurance as home mort-gage interest. The insurance must be in connection with home acquisition debt, the insurance contract must have been issued after 2006, and you must have paid the premiums before 2008 for coverage in effect during 2007.

This is on the PMI-US website...

Q.

Do all mortgage borrowers using mortgage insurance qualify for the MI tax deduction? A.

Currently, this MI tax-deductibility legislation only applies to eligible borrowers with adjusted gross incomes of $109,000 or less who purchase or refinance a home between 2007 and 2010, and pay mortgage insurance premiums.

Borrower-paid mortgage insurance premiums allocable to 2007 through 2010 will be fully deductible for eligible taxpayers who are married, single or head-of-household and who earn up to $100,000. The amount of the deduction incrementally phases out for those who have adjusted gross incomes between $100,000 and $109,000 annually.

In my opinion, refinance is not "acquisition debt." Am I missing something here? Does anyone have any other references to clarify? Do you think I am in error here?

I found my own answer. Just having my eyes go fuzzy already...

Refinanced home acquisition debt. Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later).

IRS Pub 336

[TAXBILLY]

Jack,

Had to take out the magnifying glass to read your post. :~))

tabilly

[joanmcq]

Wow. So we get to try to figure out how much of the refi is accquisition debt, and prorate the mortgage interest accordingly. As you can tell I am underwhelmed at the prospect.

[jainen]

>>try to figure out how much of the refi is acquisition debt<<

Since we are only looking at new mortgages, you just need the escrow statement which will show the old payoff amount. Hopefully you likewise have a copy of previous escrow statements if this was not the first refinance after purchase. Be sure to ask them if any loan proceeds were used for capital improvements. The regs specify ordering rules, so any payment would have been allocated to the non-acquisition portion. PMI isn't very common on refinances anyway.

[joanmcq]

I'm just being very very cynical about the tax law changes, updates, rebates, & general shuffling of $$ from one hand to the other at this very moment.

*Sigh* Its too early in the season for me to be thinking "Is it over yet?"