Unless you put 20% or more down when you bought your new home, you are probably paying for private mortgage insurance on the mortgage loan. But there’s some good news – if you took out the mortgage after January 1, 2007, you could get a tax break on the PMI premiums.
Unless you put 20% or more down when you bought your new home, you are probably paying for private mortgage insurance on the mortgage loan. Even though you’re paying for it, PMI is really designed to protect the mortgage lender in case you default. But there’s some good news — if you took out the mortgage after January 1, 2007, you could get a tax break on the PMI premiums. In 2006, Congress tucked the deduction into a tax relief act, covering PMI policies on home loans generated in 2007. A year later, the tax break was extended to premiums paid on loans originated in 2008 through next year.
Claiming the PMI premium deduction is fairly easy. You’ll find a special line devoted to PMI premiums on Schedule A, where you claim itemized expenses. Chances are also good that your lender will break out PMI premiums on your year-end mortgage statement, so you won’t have to hunt down the exact amount from your records.
You may also be able to deduct PMI premiums on mortgages used to buy a second home or on refinanced loans. The January 1, 2007, time threshold applies to these loans too, and there are income restrictions as well. For married couples filing jointly, the PMI premium deduction begins to phase out when their adjusted gross income reaches $100,000. When the taxpayer’s AGI hits $109,000, the deduction disappears entirely.