With the changes in the industry of 2nd mortgages being pretty much obsolete, more and more homeowners are either choosing or required to have Mortgage Insurance (MI or PMI). This is insurance for the lender for loans over 80% of the appraised value of the property. The tax legislation (allowing MI premiums to be deducted on personal tax returns), originally approved in December 2006, pertained only to loans closed in the 2007 calendar year. With this renewal, there are three important points to note:
- The tax deductibility extension is for three more years (through 2010). After that, it will have to be renewed again for existing homeowners to continue to deduct premiums and for new borrowers to take the deduction.
- The specifics of the legislation will remain the same. Borrowers whose annual adjusted gross income is $100,000 or less can deduct their mortgage insurance premiums from their 2007-2010 federal income tax returns for homes purchased or refinanced during this time frame. Those with incomes between $100,000 to $109,000 are eligible for a reduced tax break under the law.
- Deducting the cost of mortgage insurance on federal tax returns is estimated to save borrowers $200-$400 each year.
