Congress has extended the tax deduction on mortgage insurance for 2015 and 2016.
This is great news for current homeowners, for new buyers and helps reduce the cost of home ownership. You may not have been happy about the mortgage insurance your lender required when you purchased your home, but you may be able to deduct the amount you paid for the insurance. 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. This tax deduction was set to expire in 2014, but thanks to last-minute changes by Congress and the president with the Tax Increase Prevention Act, the private mortgage insurance deduction has been retroactively extended for 2015 and will continue for 2016.
Do you qualify for the tax deduction?
- Your home was purchased in 2007 or later
- Your mortgage was for your primary residence
- You do not exceed income limits
- Borrowers with adjusted gross incomes up to $100,000 can deduct 100% of their borrower-paid mortgage insurance premiums
- Deductions are reduced by 10% for each additional $1,000 of adjusted gross income, phasing out after $109,000
- The threshold for married borrowers filing separately is $50,000 of adjusted gross income per person. Deductions are reduced by 5% for each additional $500 of adjusted gross income, phasing out after $54,500
So there you have it – as always if you have questions of a financial nature it’s best to consult an accountant.