Can I get a tax deduction for PMI?
No. And I'll let my good friend and fellow blogger Kay Bell answer in some detail, in her article Deducting private mortgage insurance.
"I've heard that the bank may agree to a ""one time adjustment"" to lower the payments on Mortgage #2 because of paying a very large payment. Is this something that really happens? It's to the banks advantage to reduce the payments in that situation.  If they were willing to loan you money previously, they should still be willing.  If they keep the payments the same, then you'll pay off the loan faster.  Just playing with a spreadsheet, paying off a third of the mortgage amount would eliminate the back half of the payments or reduces payments by around two fifths (leaving off any escrow or insurance).   If you can afford the payments, I'd lean towards leaving them at the current level and paying off the loan early.  But you know your circumstances better than we do.   If you are underfunded elsewhere, shore things up.  Fully fund your 401k and IRA.  Fill out your emergency fund.  Buy that new appliance that you don't quite need yet but will soon.  If you are paying PMI, you should reduce the principal down to the point where you no longer have to do so.  That's usually more than 20% equity (or less than an 80% loan).   There is an argument for investing the remainder in securities (stocks and bonds).  If you itemize, you can deduct the interest on your mortgage.  And then you can deduct other things, like local and state taxes.  If you're getting a higher return from securities than you'd pay on the mortgage, it can be a good investment.  Five or ten years from now, when your interest drops closer to the itemization threshold, you can cash out and pay off more of the mortgage than you could now.   The problem is that this might not be the best time for that.  The Buffett Indicator is currently higher than it was before the 2007-9 market crash.  That suggests that stocks aren't the best place for a medium term investment right now.   I'd pay down the mortgage.  You know the return on that.  No matter what happens with the market, it will save you on interest.  I'd keep the payments where they are now unless they are straining your budget unduly.  Pay off your thirty year mortgage in fifteen years." yeah, i get that it's not optional. just sucks that nothing has changed substantially since i closed on the loan 11 months ago (same PMI, same HO, essentially the same property taxes) and now i have to pay more. seems like the closing docs could have taken into account timing of those payments so that i primed the pump with enough from the beginning. I don't think anyone can give you a definitive answer without knowing all about your situation, but some things to consider: If you are on a 1099, you have to pay self-employment tax, while on a W-2 you do not. That is, social security tax is 12.4% of your income. If you're a 1099, you pay the full 12.4%. If you're W-2, you pay 6.2% and the employer pays 6.2%. So if they offer you the same nominal rate of pay, you're 6.2% better off with the W-2. What sort of insurance could you get privately and what would it cost you? I have no idea what the going rates for insurance are in California. If you're all in generally good health, you might want to consider a high-deductible policy. Then if no one gets seriously sick you've saved a bunch of money on premiums. If someone does get sick you might still pay less paying the deductible than you would have paid on higher premiums. I won't go into further details as that's getting off into another question. Even if the benefits are poor, if there are any benefits at all it can be better than nothing. The only advantage I see to going with a 1099 is that if you are legally an independent contractor, then all your business expenses are deductible, while if you are an employee, there are sharp limits on deducting employee business expenses. Maybe others can think of other advantages. If there is some reason to go the 1099 route, I understand that setting up an LLC is not that hard. I've never done it, but I briefly looked into it once and it appeared to basically be a matter of filling out a form and paying a modest fee. "There's currently not much reason to keep around a long-term non-deductible Traditional IRA in my opinion -- a Roth IRA is almost strictly better. Think about it: a non-deductible Traditional IRA vs. a Roth IRA of the same amount. In both cases, contributions are after-tax (so no tax deduction). But when you withdraw, for the Roth IRA you don't have to pay tax, and for the non-deductible Traditional IRA, you have to pay tax on the ""earnings"". A Roth IRA can be contributed to at pretty much any income level, thanks to the backdoor Roth IRA process (which uses a temporary non-deductible Traditional IRA in the process). So there is not much reason for a long-term non-deductible Traditional IRA. As for your question, a non-deductible Traditional IRA vs. a taxable account. Well, a non-deductible Traditional IRA is contributed to with after-tax money, and taxed on the earnings only on withdrawal. So the taxation is almost identical to things like stocks and homes, where the gain is not realized until the thing is sold. However, compared to things like savings accounts and bonds, where you get taxed on the interest yearly, it is much better. Every time you get taxed on gains like this, it is taxing gains earned from after-tax money, so if you think of an amount of money as being equivalent to the amount of money it grows to over time (time value of money), then it is taxing money that is (or grown from money that is) already taxed. So it is better to have this only happen at the end at withdrawal than every year." The initial beneficiary of 529 plan can be virtually anyone you choose--even yourself.   529 deductions are not deductible from federal taxes.  You have about a 60% chance of living in a state that allows you to deduct contributions to your state's plan from your state taxes.   I'd be more specific, but your profile is pretty much empty and there's no location info to assist me in determining if this applies to you or not. if that does apply I'm pretty sure it's limited to earned income, so you get little benefit from depositing the loans, and it generally only applies to YOUR state's plan. The major benefits to 529 plans are that the money grows tax free, and withdrawals are not subject to taxes.  However if you are not investing long term, then it's pretty hard to gain much from those benefits. Since you have such a short time horizon, you'll want to make sure the plan investments are directed to very low risk vehicles like a money market fund. One of the better sources for 528 info is www.savingforcollege.com First, can I even roll any my profits into a 529 plan to avoid taxes. No. 529 plans are not pre-tax (except for State taxes in certain States, where 529 contributions are deductible. Ohio is such a State, with certain conditions). For Federal taxes - funding a 529 with yourself as a beneficiary doesn't change a thing on your taxes. Is there any special requirements for the state of Ohio. Yes, see the link above. Essentially you'll be carrying the deduction forward for years until you exhaust it, $2000 at a time. Is there a better solution that I am overlooking. No. If it was easy to avoid income taxes - everyone would be doing it. I work for a mortgage company but one that sells the loans we fund to banks. I've never heard of that risk mitigation incentive (lower rate for auto payments) but I know for a fact you will have a higher interest rate if you choose to pay your taxes and insurance out of your own pocket and not escrow them. I would contact the CFPB instead of an attorney and they will be able to tell you very quickly whether this is an acceptable practice or not. "I did a little research and found this article from 2006 by a Villanova law professor, titled ""No Thanks, Uncle Sam, You Can Keep Your Tax Break"".  The final paragraph of the article says: Under these circumstances, it is reasonable to conclude that a taxpayer is not required to claim a allowable deduction unless a statutory provision so requires, or a binding judicial precedent so specifies. It would be unwise, of course, to forego a deduction that the IRS considers mandatory such as those claimed by self-employed individuals with respect to their self-employment,    whether for purposes of the self-employment tax or the earned income tax credit. Until the statute is changed or some other binding authority is issued, there is no reason taxpayers who wish to forego deductions, such as the dependency exemption deduction, should hesitate in doing so. (The self-employment tax issues in the quote cited by CQM are explicitly discussed in the article as one of a few special kinds of deduction which are mandatory.) This is not a binding statement: it's not law or even official IRS policy.  You could never use it as a defense in the event that this professor turned out to be wrong and the IRS decided to go after you anyway.  However, it is a clear statement from a credible, qualified source."