Your mortgage can be the source of many write-offs that can save you thousands of dollars on your taxes. In addition to mortgage interest, points and various other costs, you can claim mortgage insurance premiums paid at closing as a home mortgage interest deduction if your mortgage meets certain rules and conditions laid out by the Internal Revenue Service.
Qualified Mortgage Insurance
You may claim mortgage insurance premiums on line 13 of Schedule A (Form 1040) as a home mortgage interest deduction if the premiums paid were for qualified mortgage insurance. Qualified mortgage insurance is private mortgage insurance or insurance provided by the Department of Veterans Affairs, the Federal Housing Administration or the Rural Housing Service. The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006.
Secured Home Acquisition Debt
For you to claim your mortgage insurance premium as a home mortgage interest deduction, the mortgage must be a secured home acquisition debt. This is a document stating that your home can be used to pay off the mortgage loan in the event of default and that the mortgage is used to buy, purchase or build a home. According to the 2012 IRS rules, mortgages taken out after October 13, 1987, must not exceed $1 million or $500,000 if you are married and filing separately.
To claim the deduction, your home must also be a qualified home or second home. A qualified home is any property that has cooking, sleeping and toilet facilities. It must be your main home -- the home where you live most of the time. A second home can be any other home besides your main home. Your second home is deemed a qualified home if you do not hold it out for rent or resale during the year regardless of whether you live in it or not at any point during the year. If you rent out your second home during the year, it can only be a qualified home if you live in it for a minimum of 14 days or 10 percent of the length of time you rented it out, whichever is longer.
Prepaid Mortgage Insurance
If you prepaid your mortgage insurance premiums, you cannot claim the full amount at closing unless it is mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. For all other mortgage insurance, you must allocate the premiums over 84 months or the full length of the mortgage term, whichever is shorter.
Philippe Lanctot started writing for business trade publications in 1990. He has contributed copy for the "Canadian Insurance Journal" and has been the co-author of text for life insurance company marketing guides. He holds a Bachelor of Science in mathematics from the University of Montreal with a minor in English.