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Mortgage Insurance as Rental Expense

My client has a single family rental house which she has been renting out for many years. When she first got her mortgage she was charged private mortgage insurance because her down payment was not 20%. I have been deducting this insurance premium on her Sch. E. I recently got into a discussion with a mortgage broker friend who says that this premium is not deductible. After scouring the IRS sites and the publication on rental property I have found that PMI is not added to basis and is not amortized over the term of the loan, but nowhere did I find it either permitted or prohibited as a deduction as paid. Who is right? Linda Dorfmont E.A., CFP, CSA

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Reply to
DORFMONT
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You are.

the mortgage broker was thinking only in terms of personal deductions on schedule a and didn't consider deductibility of ordinary and necessary rental expenses. ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

It's not deductible as an interest expense, because it's not interest. But I suppose it could be deductible as an ordinary and necessary business expense. Stu

Reply to
Stuart A. Bronstein

Not a deduction for 2006 or earlier.

For new loans with a PMI in 2007, and it expires in a year or two, PMI will be allowed as a mortgage deduction.

-- Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

You are as far as rental property is concerned.

Never rely on mortgage brokers for useful tax advice.

Reply to
Bill Brown

It's rental property, Art.

ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

And you thought a mortgage broker knew something about taxation.

You are and it wasn't even close. It's a requirement of the loan for the benefit of the lender. Therefore, it is deductible.

Dick

Reply to
Dick Adams

However, if the LTV ratio is now lower than 80%, the PMI should no longer be necessary. That can occur due to principal paydown, or value increase. Seth

Reply to
Seth Breidbart

Well, sure it is, now that you (and Linda) point that out:^)

You are all right. pmi is a deduction for rental property.

-- Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Reply to
Arthur Kamlet

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