Discussion Forum

Marty Couch
Investor

PMI

Tuesday, December 26 2006 01:14 PM

Hello All,

We have been getting a few folks asking here at the title company if PMI will be tax deductable in 2007.

First, this question only applies to principle residences. As far as rental properties go, this is from the IRS website at www.irs.gov

"Can you deduct Private Mortgage Insurance (PMI) premiums on rental property? If so, which line item on Schedule E?

Yes. You can deduct Private Mortgage Insurance premium on line 9 of Form 1040, Schedule E (PDF), Supplemental Income and Loss. Write "PMI" on the dotted line. "

As far as for principle residences, here is the information I have:

As of 1/1/007 PMI payments on a mortgage will be tax deductable. This was passed by the 109th congress. The following applies:

Caveat No. 1: The tax deduction applies only to mortgages that are closed in 2007. If you have a loan with mortgage insurance in 2006, you won't be able to deduct the premiums in the 2007 tax year unless you refinance in 2007.

Caveat No. 2: There are income limits. You get the full deduction if your adjusted gross income is $100,000 or less. The amount you can deduct phases out rapidly after that, and no mortgage insurance deduction is available if you make more than $110,000.

Caveat No. 3: This is a one-year deal, and Congress would have to renew the deduction to make it apply for the 2008 tax year and beyond. Congress probably will extend the deduction, but you can't know for sure.

Caveat No. 4: If you take the standard deduction instead of itemizing deductions, the new law makes no difference to you. "You need to have a mortgage of about $130,000 or so to even pay enough interest to hurdle the standard deduction," says Bob Walters, chief economist for Quicken Loans. In practice, he says, this means that the deduction is available to households with incomes between $50,000 and $100,000.

I'm posying this because we are seeing more and more loan officers using the PMI tax deduction as a selling point and I figure it was fair to give the group some back ground info.

Of course, this has nothing to do with those who are already able to put 20% down. For those of us not yet there, I thought this would be some usefull information.

Marty Couch
http://www.PPLChicago.com

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