You May be Out Over $600 in Deductions…
By Greg Iverson
Mortgage Banker – Envoy Mortgage
A very important tax benefit disappeared at the end of December that could cost homeowners thousands every year in lost tax deductions. This tax benefit was for homeowners who pay private mortgage insurance premiums as part of their monthly mortgage payments.
Many homebuyers in recent years have taken advantage of lower down payment mortgage programs, oftentimes with only 5, 10 or 15% down. These mortgages come with a monthly mortgage insurance premium that protects the lender in the event that the borrower defaults.
Beginning in 2006, these mortgage insurance premiums were tax deductible (similar to mortgage interest) within certain restrictions. Single borrowers and married borrowers filing jointly with adjusted gross incomes of $100,000 or less could write off 100% of their annual mortgage insurance premiums. Married borrowers filing singly were able to write off 50% of premiums. Above $100,000, borrowers were possibly able to qualify for partial deductions on a sliding scale.
As of January 1st, this tax incentive is no longer available along with 58 other tax code benefits such as tax credits to homeowners making energy-efficient home improvements.
MGIC, a private mortgage insurer estimates that a borrower earning $100,000 per year with a mortgage of $200,000 stands to lose between $600 and $1,000 per year in tax deductions.
There is still some hope that this part of the tax code could be included in an election year package that could be passed later in the year. One thing is for sure, homebuyers of the last few years will want to keep a close eye on this and possibly look to a loan program with Lender Paid Mortgage Insurance if they are no longer able to deduct the premiums they’ve been paying and still don’t quite have 20% equity in their home.
