Today TaxMama hears from Christy in the TaxQuips Forum,with this question. “Just wondering if mortgage insurance would be deductible if not included on form 1098 from the lender? The client purchased the home in 2007 and has a loan balance for 09 of $215,000.00. It is their only home. He and his family reside in the home full time. He pays for the mortgage insurance separatley. It does not come out of escrow. Would this still be considered “qualified mortgage insurance“? He had to get the insurance to get the loan.”
Dave Toelkes provided an excellent explanation of the concept of “Qualified Mortgage Insurance.” If you want more details, the description of the Mortage Insurance can be found here in IRS Publication 936. This is a source David uses, among others.
The rules about the deductibility are also in Pub 936, further on.
Typically, you would get the Form 1098 showing the PMI along with the interest expense because most lenders insist on impounding the premiums. It’s unusual to have a homeowner pay the premiums separately. Please re-read the definition of the PMI carefully.
However, to me, it sounds more like homeowners insurance you’re describing. That is often paid directly by the homeowner to help you replace or rebuild the home in the event of a calamity.
Just so you understand the difference, PMI protects the LENDER, not the homeowner, in case you default on the loan.
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