Mortgage Insurance: The Zombie Deduction

Mortgage Insurance. Many of you who have purchased a house in the past decade may be familiar with it. If you do not have a 20% down payment, your mortgage lender will probably require mortgage insurance. It’s an extra amount you pay every month that helps cover the lender if something goes wrong.
Once upon a time, you could deduct (in certain situations/income) this amount along with your mortgage interest. It was right there on your 1098 tax form from your lender and you could put it right with your itemized deductions on Schedule A.

Until December 31, 2016, that is.

This deduction expired. No more. Kaput. Dead. You still have to pay the insurance, but your lender may not even put it on your 1098. There’s no line for it on your Schedule A. Too bad, so sad. Adios deduction.

But wait! When Congress passed a spending bill in February, they included a few “tax extenders.” Things that were expired were back in including the Mortgage Insurance Deduction!

Woo Hoo! It’s alive! Just like it was before. But only until December 31, 2017.
Yes, that’s right, Congress brought it back just to kill it again. In the past. They didn’t even really let it live again. That’s why I call it a zombie deduction.
But what does all this mean to you? Well, if you pay mortgage insurance this could mean an easy to miss deduction. And it might not be easy to take. Your lender already sent your 1098 and since the deduction had been dead for a year they most likely didn’t include how much you paid for mortgage insurance on your tax form. Why include a number there that no longer has anything to do with your taxes?

You will need to go back through your statements for 2017 and figure out what you paid. This can then be included with your itemized deductions.
What if you have already filed? In that case you will need to submit an amended tax return.
As usual, whether you can actually take the deduction depends on many factors including your income. And you don’t have to figure it all out alone. We here at KMS Tax Preparation are familiar with all of this and can guide you through it.

We know how to handle zombies.  And zombie deductions.  And deductions.