The news that mortgage insurance tax deductibility has been extended through 2011 is another incentive to consider purchasing a home this year. Homeowners can take that deduction on mortgage insurance certificates issued from 2007 to the end of this year. The insurance deduction is also valid on refinanced mortgages.
Here are the key points for this federal law:
- Generally, homeowners who put down less than 20 percent on the purchase price are required to purchase mortgage insurance. That premium is tax deductible.
- There is an income limit—this deduction is available to homeowners whose gross adjusted income is $100,000 or below. Those buyers can deduct 100% of their premiums on their federal tax returns.
- Homeowners who want to take advantage of the tax deduction must file a long form for federal income tax that itemizes deductions.
- For those who make more than $100,000 a year and want to take the mortgage insurance tax deduction, the premium deduction goes down 10 percent for each $1,000 of income over $100,000.
- Depending when your loan closes, the deduction is prorated for that first year of ownership.
- The tax deduction can apply to a second residence that the homeowner acquired for personal use. Refinanced mortgages also qualify.
As we move into the spring of 2011, the housing recovery will be watched very carefully. Despite the recent downturn in real estate, Americans still believe that owning a home is a worthwhile goal. The extension of the mortgage insurance tax deductibility helps that along.