IRS Issues Final Rule Extending Deduction for Prepaid Mortgage Insurance

For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

Final regulations reflect 2010 legislation that extended the allowance for the deduction of mortgage insurance premiums as qualified residence interest. The rules detail how to allocate prepaid qualified mortgage insurance premiums to determine the amount of the premium that is treated as qualified residence interest each taxable year. Prior to the original 2006 legislation, taxpayers could not make such a deduction, as deductions for personal interest are not allowed under tax code Section 163. The tax code specifically excludes “qualified residence interest” from the definition of “personal interest.”