Congress recently passed legislation allowing MI payments to be tax deductible for mortgages closed in 2007.
The Mortgage Insurance Fairness Act will allow homeowners with adjusted household incomes of $109,000 or less to deduct some or all of the cost of their MI premiums from their annual income on their 2007 federal tax returns.
Eligibility Parameters
• Loans closing in 2007 (January 1st – December 31st) that are required to pay private mortgage insurance, FHA Mortgage Insurance Premium (MIP) or the VA Funding Fee. Note: The legislation will be evaluated for extension into future years by Congress towards the end of 2007.
• All MI payment options are eligible for deduction under the new law. In the case of the Financed/Single Premium option, a portion of the up front premium may be deductible in the first year. If the law is extended, the remaining portion may be deductible in subsequent years. A tax advisor should be consulted to determine the actual deduction amount.
• Purchase and refinance transactions are eligible
• Eligible primary residence and second homes are permissible. Additional restrictions for investment properties apply and should be discussed with a tax advisor.
Tax benefit
• Mortgage insurance premiums will be 100% deductible for households whose adjusted gross income is $100,000 or less
• The tax benefit for households with adjusted gross income between $100,001 and $109,000 is based on the following declining scale:
|
Adjusted Gross Income
|
Percent of Deductible MI
|
|
$100,000 or less
|
100%
|
|
$100,001 - $101,000
|
90%
|
|
$101,001 - $102,000
|
80%
|
|
$102,001 - $103,000
|
70%
|
|
$103,001 - $104,000
|
60%
|
|
$104,001 - $105,000
|
50%
|
|
$105,001 - $106,000
|
40%
|
|
$106,001 - $107,000
|
30%
|
|
$107,001 - $108,000
|
20%
|
|
$108,001 - $109,000
|
10%
|
|
$109,001 or more
|
0%
|
|
