Recently, you may have received a corrected Internal Revenue Service Form 1098 from your mortgage lender. The correction probably spells good news for you.
When the Bipartisan Budget Act of 2018 became law in February, certain tax provisions that expired at the end of 2016 were retroactively renewed for the 2017 tax year. Among them: the tax break that allows homeowners to write off mortgage insurance premiums, or MIP.1
You may be able to deduct MIP once more and save hundreds of dollars. If you are carrying a $200,000 home loan and you are in the 25% income tax bracket, you could save about $425 in federal taxes, thanks to the comeback of this deduction. You might even be able to deduct prepaid mortgage interest and points – check with a tax professional to see.1,2
Your adjusted gross income may limit the amount of MIP you can write off. When it exceeds $100,000, the deduction enters a phase-out range. The top end of the phase-out range is $110,000; above that, the deduction for MIP disappears. Property value limits also apply.1,3
The MIP deduction must pertain to a “qualified home.” That means a home that was your principal residence during 2017. (Even if you spent the bulk of 2017 in a vacation home, that vacation home could qualify.)1,3
The I.R.S. told lenders to send corrected 1098s to borrowers by March 15. Your corrected 1098 shows you the MIP amount you paid in 2017, unlike the previous version. If you do not yet have a corrected Form 1098, contact your lender. (Lenders have been directed to file corrected 1098s with the reportable amounts by this year’s federal tax deadline.)4
Have you already filed your 2017 federal taxes, and do you expect a refund? If your answer to both of those questions is “yes,” you will have to wait until you receive your federal tax refund before you can amend your 2017 federal tax return. (It can be amended any time during 2018.)5
If you received a corrected Form 1098, talk to a tax professional. Whether you have filed your taxes yet or not, you should follow up on this development.
Greg Ferguson may be reached at 952-406-8316 or greg@fergfin.com.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – quickenloans.com/blog/changes-store-mortgage-insurance-premiums-1098-2017 [2/23/18]
2 – marketplace.org/2018/02/12/economy/tax-bill-2017/low-income-and-middle-class-homeowners-might-see-their-tax-refunds [2/12/18]
3 – chicagotribune.com/classified/realestate/ct-re-0225-kenneth-harney-20180220-story.html [2/22/18]
4 – bankingjournal.aba.com/2018/02/irs-issues-information-reporting-guidance-for-mortgage-insurance-premiums/ [2/23/18]
5 – tinyurl.com/yb7duvah [2/24/18]
