Deductibility of Mortgage Insurance Premiums Extended for 2017 Tax Year
Articles by: Richey May, Feb 14, 2018
February 2018 – On February 9th, President Trump signed H.R. 1892, the “Bipartisan Budget Act of 2018”. H.R. 1892 includes the extension of over 30 tax provisions that had previously expired after December 31, 2016, commonly referred to as the “extenders.” Included in this extenders package is the deductibility of Mortgage Insurance Premiums (MIP).
Mortgage Insurance Premiums are reported on Forms 1098, which are required to be issued by January 31st each year. The 2017 instructions for Form 1098 state that MIP should only be reported in Box 5 if section 163(h)(3)(E) applies for the applicable tax year and, therefore, would not have been included in a timely-filed Form 1098. However, now that the extenders package has passed, MIP is deductible for the 2017 tax year (subject to phase-out at the individual level), and issuers should issue corrected Forms 1098 to include in Box 5 the amount of MIP paid in the 2017 tax year.
If you have already filed your 2017 Forms 1098 and excluded the MIP paid in 2017, corrected Forms 1098 will need to be issued to borrowers (where applicable). If the originally-filed Forms 1098 included the reporting of MIP paid in 2017 in error, no action will be required. If you have any questions regarding this issue, please contact a Richey May tax professional or consult your tax advisor.
The IRS is reviewing the legislation signed on February 9th that retroactively extended and modified numerous tax provisions covering 2017. They are assessing these significant changes in the tax law and are working to determine next steps. The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community. While we expect that corrected Forms 1098 will be required by the IRS, we believe that most mortgage companies will want to issue corrected Forms 1098 to inform their borrowers of this change regardless of IRS guidance to ensure that that their borrowers are able to take advantage of the deduction, which, for many homeowners who pay MIP, could be significant.
We will continue to monitor these changes and provide you with more details as they become available. You can also contact us with any questions you may have.