Mortgage Insurance Tax-Deductibility Law Extended through 2011

Mortgage and Lending with AmeriFirst Financial, Inc. AZ BK-0013635

Great news:  The Mortgage Insurance Tax-Deductibility Law has been Extended through 2011.  

The law provides for an itemized deduction on federal tax returns for the cost of private mortgage insurance paid by eligible borrowers.  Prior to 2007, borrowers could not deduct the cost of their mortgage insurance payments. The following questions & answers were provided by PMI Mortgage Insurance Company:

Private Mortgage Insurance


Q. What savings amount can a typical homeowner with mortgage insurance expect?

A. Individual savings will vary depending on the size of the loan and a borrower's adjusted gross income and tax bracket.  According to an analysis by Bankrate, a leading source of consumer financial information, a homeowner with a $180,000 mortgage would save about $351 in taxes a year.

Q. How long will this tax deduction be available?

A. The legislation specifies that the tax deduction applies to mortgage insurance contracts issued in 2007-2011, so it would include purchases and refinances within those years.  However, Congress has the power to extend the tax deduction to future years, or even to make it permanent.

Q. Do all mortgage borrowers using mortgage insurance qualify for the MI tax deduction?

A. Currently, this MI tax-deductibility legislation only applies to eligible borrowers with adjusted gross incomes of $109,000 or less who purchase or refinance a home in 2007-2011, and pay mortgage insurance premiums.

Borrower-paid mortgage insurance premiums allocable to 2007-2011 will be fully deductible for eligible taxpayers who are married, single, or head-of-household and who earn up to $100,000. The amount of the deduction incrementally phases out for those who have adjusted gross incomes between $100,00 and $109,000 annually.

Q. Are there any occupancy restrictions?

A. The deduction applies to "qualified residence" as defined in the Internal Revenue Code.  Generally that includes the taxpayer's principal residence and up to one other residence selected by the taxpayer for purposes of the deduction for qualified residence interest.  Note - the other residence must be used for personal purposes by the taxpayer for 14 days or 10% of the days during the tax year that the unit is rented for fair value, whichever is greater, among other criteria in the tax code.

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Q. Are investor loans eligible?

A. No, investor loans are not eligible.

Q. Is there a loan amount limit?

A. No. It is only limited by income of the taxpayer.

Q. Does the MI tax deduction apply to Lender-paid mortgage insurance (LPMI)?

A. No. LPMI is a product in which the MI premiums charged to a lender are not passed on to the borrower in the escrow arrangement; instead, they are paid by the lender or are passed on to the borrower, if at all, via increases in the loan interest rate or other fees. Most mortgage interest is already deductible under the tax code.

Q. Do tax deductions have to be itemized on tax returns in order to take the deduction?

A. Yes. In order to take advantage of the MI tax deduction, borrowers must include their MI premium payment information on their itemized tax returns.

Q. If a financed single premium is paid by the SELLER as a concession, who, if anyone, gets the deduction?

A. A concession by the seller to pay something at closing is a purchase price adjustment regardless of how it is described and, whether it is points or mortgage insurance, the cost is borne by the buyer.  Theoretically, this would be analogous to "points" paid at closing, and should be deductible by the borrower regardless of how it appears on the closing statement. However, because mortgage insurance premium deductibility is a new issue, the IRS may not reach the same conclusion. Regulation may be needed to answer this question.


For more information, see PMI Mortgage Insurance Companies complete list of Frequently Asked Questions.

For an example of MI Rates, see PMI Mortgage Insurance Companies Monthly Rates effective 10/1/08 for a Standard 30-year fixed. Distressed Market rates subject to LTV and geographic restrictions.  


Posted by

Gilda Kemp, AmeriFirst 480-275-8141

                                       Call me: 480-275-8141         or          send me an email

The opinions expressed here are the personal opinions of Gilda Kemp. Content published here is not read or approved by Amerfirst Financial before it is posted and does not necessarily represent the views and opinions of Amerifirst Financial.


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Gilda Kemp

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