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Old 09-15-2011, 08:27 PM
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Deduct VA mortage insurance (VA funding fee)

I deducted a VA funding fee I paid in '09 on my 2009 tax return. According to publication 936, VA mortgage insurance is known as a funding fee and is fully deductible in the year paid as qualified mortgage insurance. However, this year I received a letter from the IRS stating that my mortgage insurance deduction for '09 was corrected to $0 and that I owed more than $4K in back taxes for 2009. I replied with a copy of my HUD-1 showing the VA funding fee paid and the page from IRS pub. 936 showing that the VA fee paid was considered mortgage insurance and was fully deductible in the year paid. The IRS replied back with a letter requesting to see a copy of my "corrected" 1098 showing the mortgage insurance paid. However, my bank (Chase) replied in an e-mail that they do not put VA funding fees on their 1098's (even though I referenced IRS instructions for 1098 that these fees should be included in box 4 if over $600). Chase said they were sorry and could not comply with my request for a corrected 1098. My question, can the deduction for mortgage insurance be taken if not on the 1098?



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Old 09-16-2011, 04:51 AM
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“However, my bank (Chase) replied in an e-mail that they do not put VA funding fees on their 1098's (even though I referenced IRS instructions for 1098 that these fees should be included in box 4 if over $600). Chase said they were sorry and could not comply with my request for a corrected 1098. My question, can the deduction for mortgage insurance be taken if not on the 1098?”---->Correct; as you can said and did, the VA funding fee is fully deductible in the year that you closed on the mortgage, unlike most prepaid insurance fees which must be amortized. Even though it doesn't show up on your Form 1098 it is still deductible and will show on your HUD-1 closing statement as you said above. VA funding fee is reported on box 4(mort. Ins. Pre.) of Form 1098 if total premiums of $600 or more is paid (received) in 2011.



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Old 09-30-2011, 07:54 PM
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VA funding fee

Thanks for the response. I faxed the IRS back a response quoting again portions of IRS pub 936 that the VA funding fee was fully deductible in 2009 along with e-mails from Chase that they do not put funding fees on their
1098s and an e-mail from the VA that they do not issue 1098s. I'm now waiting for the IRS answer. I'm curious to see whether or not they will tell me to pay back w/ interest a legitimate deduction listed in their own publication. I will update this thread when the answer comes back.



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Old 09-30-2011, 08:06 PM
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" I'm curious to see whether or not they will tell me to pay back w/ interest a legitimate deduction listed in their own publication. I will update this thread when the answer comes back."--> The IRS has over 150,000 employees. I guess not all of the IRS agents are very helpful; good luck to you.



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Old 10-03-2011, 12:11 PM
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RE: Publication 936 VA Funding Fee

I too am having the same problem. I sent the IRS my closing statements in 2009 showing the VA funding fee. Their response was that it wasn't interest or points and could not be deducted. There is a lot of tax code out there, guess the IRS cannot be up on all of it, eh? I'll be pointing my IRS reprensentative to the publication 936 this week.

I look forward to your latest response from the IRS. I will post mine as well. Good luck!



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Old 11-18-2011, 07:02 PM
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VA funding fee (response from IRS)

I received a reply from the IRS today on the original subject of the VA funding fee deduction. The letter states "we're pleased to tell you that the information you provided resolved the tax issue in question and that our inquiry is now closed. The amount due is $0.00". Thanks for the helpful feedback/posts on this subject!


Last edited by randystoker : 11-18-2011 at 08:06 PM.


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