IRS mortgage insurance deduction for the 2017 tax year was one of the 30 deductions eliminated with the December signing of the Tax Cuts and Jobs Act of 2017. When President Trump signed the Bipartisan Budget Act of 2018 in early February, the deduction was extended for the tax year of 2017.
What is the IRS mortgage insurance deduction?
This exemption allows qualified homeowners to still deduct the mortgage insurance premiums for the 2017 tax year:
- Households with an adjusted gross income (AGI) of no greater than $100,000 will be allowed to deduct 100 percent of the mortgage insurance premiums.
- Households with an AGI over $100,000 will have a reduced deduction, and
- Households with an AGI over $109,000, premiums are not deductible.
The IRS mortgage insurance deduction extension is set to expire and will be eliminated for the 2018 tax year.
What was the confusion when this deduction was extended?
By early February 2018, over 18 million tax returns had already been received. Nearly all returns had been processed by the IRS. When the Bipartisan Budget Act of 2018 was signed, lenders rushed to send corrected IRS Form 1098s to their borrowers. Those who had already filed their taxes without taking this now-available deduction literally had a panic attack as they began receiving corrected 1098s. They didn’t know if the extension was the same as the previous year or how their tax returns would be affected.
Before we could even contact our clients, I advised my tax team that “…my email is blowing up because the mortgage companies are sending out corrected 1098’s with a letter about the retroactive deductibility of the MIP.”
It’s going to be okay. You’ve already done the right thing and filed your returns.We’ve already reviewed nearly 200 filed returns which were or could have been affected by this extension. We’re taking care of you.
If we filed your taxes or will be filing your taxes, don’t worry. We’ve got you covered. In fact, there could even be more surprises, not that we are or aren’t expecting them, but we’ll take care of you. It’s going to be okay.
What is mortgage insurance and why is it needed?
Mortgage insurance policies are issued by private insurance companies as conventional loans, or by other agencies, such as the Federal Housing Administration, Department of Agriculture’s Rural Housing Service or the Department of Veterans Affairs. These policies (or loans) allow a buyer to borrow additional money to help with their down payment to meet the required 20 percent. It could be explained that the buyer is buying collateral for a loan. Mortgage insurance simply protects the lender from loss if the borrower defaults on the loan.
So what’s the bottom line on this?
The last thing the IRS wants to do right now is tangle with somebody’s tax return filed by a CPA. You’re virtually at the bottom of the list. There’s no easy money for the IRS to go after, and there are just too many errors in those returns done by the DIYers, pop-up tax services and big-box tax shops.
We establish and maintain a personal and business relationship with our clients. Your LIFE is your business and your BUSINESS is your life, and we’re here for YOU.
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