- What is mortgage insurance (MI) tax deductibility and how does it work?
The law provides for an itemized deduction on federal tax returns for the cost of private mortgage insurance paid by eligible borrowers. Prior to 2007, borrowers could not deduct the cost of their mortgage insurance payments. Now the law has been extended through 2011.
The federal law allows qualified borrowers with adjusted gross incomes up to $100,000 to deduct 100% of their 2007-2011 MI premiums on their federal tax returns.
The legislation is effective for mortgage insurance certificates issued in 2007-2011.
- What is the reason for the MI tax-deductibility extension?
Expanding homeownership has long been a goal of the federal government. The federal government helps make homeownership more affordable for many homebuyers by making mortgage insurance tax-deductible, and the extension of the law will benefit even more homeowners.
- What savings amount can a typical homeowner with mortgage insurance expect?
Individual savings will vary depending on the size of the loan and a borrower’s adjusted gross income and tax bracket. According to an analysis by Bankrate, a leading source of consumer financial information, a homeowner with a $180,000 mortgage would save about $351 in taxes a year.
- How long will this tax deduction be available?
The legislation specifies that the tax deduction applies to mortgage insurance contracts issued in 2007-2011, so it would include purchases and refinances within those years. However, Congress has the power to extend the tax deduction to future years, or even to make it permanent.
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