The Truth About Deducting Private Mortgage Insurance, Part 2
February 27th, 2008 categories: Mortgages & Finance
This has been updated to include new information about refinancing.
Private Mortgage Insurance, or PMI, is
“insurance that protects a lender or investor against loss if a borrower stops making mortgage payments. It makes it possible for you to buy a house with as little as a three percent down payment or less for qualified borrowers, helping you buy a home sooner than you otherwise could. “ PrivateMI.com
Although it protects the lender, the borrower actually pays for it. And until recently, PMI was not a tax deductible item for primary residences.
PMI is now tax deductible for some. Here are the requirements:
- Borrower must have purchased or refinanced* the home using a loan backed by PMI in 2007. For the next three years, ending in 2010, borrowers who pay PMI will also be able to deduct it as long as they meet the other restrictions.
- Only borrowers with an adjusted gross income of $100,000 may deduct 100% of the premium. Families earning up to $109,000 may deduction a portion of the premium.
- Premiums are deductible for the borrower’s primary residence or for a second home. Owners of rental property are already allowed to deduct PMI.
The IRS publishes a 16-page guide to “explain” this further.
*For more about how refinanced mortgages are affected, visit SmartMoney.com for their article.
Contact your tax advisor for more information.
nice article
Why is the deduction only for thosed who closed in 2007. What ab out the rest of us on PMI. I closed my loan in 2006 why does this only benefit a few and not all?
Talk to your elected representative. It doesn’t make sense, if only to make things complicated for filing tax returns but our federal government likes to make things difficult.