“When I called them and asked about it, they told me that my PMI was only deductible for the first year of my mortgage.”---->I guess it depends; for instance, in 2010, if you paid a lump-sum premium for insurance provided by FHA or a private mortgage insurer that also covers years after 2010, then you must determine the portion of the premium that pays for insurance for 2010 by dividing the total premium by the stated term (number of months) of your mortgage, or 84 months, whichever is shorter. Multiply that amount by the number of months during 2008 that your home was covered by the mortgage insurance. Enter the amount allocated to 2008 in the worksheet for Schedule A, Line 13, to figure your deduction for 2008. You figure your deduction in later years based on the amounts allocated to those years. If your mortgage is satisfied before the end of your allocation period, you cannot deduct the amounts that are allocated to periods after the mortgage is satisfied.
“ Since my mortgage was issued in 2009, they told me only my 2009 PMI was deductible. When reading the Sched A instructions it says “These fees can be deducted fully in 2010 if the mortgage insurance contract was issued in 2010.”" Should I assume my mortgage company is correct and that my 2010 PMI is not deductible since my contract was issued in 2009?”---->I guess so; you can only deduct premiums allocated to a specific year, rather than the year in which you paid them. For example, if you pay your PMI for January 2011 in December 2010, you would deduct those premiums on your 2011 tax return.PMI deduction will only be available for 12 months. As the borrower, you are required to pay this, usually as a monthly addition to your mortgage payment. The first year it is usually paid up front at the closing. Some lenders spread the PMI premium over the life of your loan and add that amount to your monthly payment as said above. Other lenders offer you the ability to prepay the entire PMI amount required for the loan upfront or roll it into the financed balance.