Reminder Mortgage Insurance is Tax Deductible!
You can deduct the cost of mortgage insurance as mortgage interest on Schedule A if you itemize your return.
If you purchased a home with less than 20% down you are paying mortgage insurance as part of your monthly payment. It is calculated as a percentage of the mortgage amount and called PMI (private mortgage insurance, conventional loan) or MI (mortgage insurance, FHA loan).
This tax deduction was created as part of the Tax Relief and Health Care Act of 2006 and originally applied to private mortgage insurance policies issued in 2007.
But because the housing market has been slow to recover, lawmakers have extended this tax break. It now is in effect for premiums paid through 2014. Unless Congress renews this deduction, the 2014 tax year is the last it can be claimed.
The private mortgage insurance deduction can be taken for policies issued by private insurers as well as insurance provided by the Federal Housing Administration (FHA loans), the Department of Veterans Affairs (VA loans), and the Department of Agriculture’s Rural Housing Service (USDA loans).
You can find the amount in box 4 of the Form 1098 that your lender sends you at year end. Also you must itemize your deductions on your return, the mortgage insurance deduction is located in the “Interest You Paid” section of your Schedule A on line 13.
Of course the IRS has time, occupancy and income restrictions so as always check with your tax professional if you have any questions.
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