PMI/MIP Tax Deduction Passed As Part Of The American Taxpayer Relief Act

PMI/MIP Tax Deduction Passed As Part Of The American Taxpayer Relief Act.  Much has been written about the Fiscal Cliff, and the impact that it would of had on homeowner if provision that impacted homeowners were not extended, such as:

• Increase in Capital-Gains Tax
• Expiration of Mortgage Interest Deduction
• Expiration of Mortgage Debt Forgiveness Act
• Bailout of Federal Housing Administration

However, one provision that has not gotten much attention, is one that is a part of the American Taxpayer Relief Act.  If the American Taxpayer Relief Act had not been extended, a huge number of lower to mid income homeowners would have been impacted, and lost a very valuable tax deduction.

Included in the American Taxpayer Relief Act, is a provision which allows homeowners who are paying Private Mortgage Insurance (PMI) or a FHA Monthly Insurance Premium (MIP) as part of their Monthly Mortgage Payment on their Primary Residence, and/or a Non-Rental Second Home to deduct the PMI/MIP from their Income Tax.  The amount of the deduction is connected to individual and/or marital income.

As you can see from the chart above the deduction is reduce by 10% for each $1,000 of the the homeowners Adjusted Gross Income (AGI) exceeds $100,000.  Therefore, the tax deductions is not available once the AGI exceeds $110,000.

Married individuals filing separate returns who have an AGI of $50,000 or less will be able to deduct 50% of their PMI/MIP premiums.  In their case the deduction is reduced by 5% for each additional $500 of AGI, and phased out after $54,500 of AGI

With the extension earlier this week of the American Taxpayer Relief Act, this tax deduction will continue to be available to lower to mid income homeowners throw 2013.  I would advise homeowners who are presently paying PMI/MIP as part of their Monthly Mortgage Payment to contact their Accountant, and find out how they will benefit tax wise as a result of the extension of the PMI/MIP Tax Deduction Passed As Part Of The American Taxpayer Relief Act.

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 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com