A long awaited law makes PMI (private mortgage insurance) deductible on homeowner's taxes. Homes that are purchased or have been refinanced in 2007 are eligible for this deduction.

PMI is an insurance policy on most home loans that carry less than 80% LTV (loan-to-value). The policy covers the lender against loss in the even of borrower default.

Many homeowners consider PMI to be frivolous and excessive; of course anything that increases housing cost doesn't exactly instill a warm, fuzzy feeling in those paying them. This new deduction at the least softens the blow for many.

Also, as a reminder - Most PMI can be cancelled when LTV hits that magic 80% mark. Usually all it takes is a phone call or a letter in order to cancel this coverage (if the borrower is paying the premium), but there are cases where it might be more difficult.

If your home is financed under an FHA mortgage, you may mistakenly believe that you are paying for PMI. The insurance coverage on a government loan is a whole different animal and has a different set of rules. For more information on that, please feel free to e-mail TeamResults@Century21.com, I'll be happy to provide any information I can.

If you haven't done your taxes yet, see my post on that here.

John Wall
CENTURY 21 Results

This post is for information purposes only and should not be relied upon in any financial / or tax planning decisions. Always seek the advice of a qualified expert.