PMI tax deductible in 2007

PMI tax deductible in 2007 - New legislation allows taxpayers who itemize their deductions to deduct premiums paid for mortgage insurance - which typically is required when home buyers purchase their homes with less than 20 percent down. Currently, only the interest paid on ones mortgage is deductible if the taxpayer itemizes deductions.

Based on the new legislation passed December 9, 2006, the provision is effective for transactions closed after December 31, 2006. MI premiums paid between January 1 and December 31, 2007 may qualify for tax deductibility on borrowers’ subsequent federal tax returns as follows:

Borrowers with adjusted gross incomes below $100,000 may deduct 100% of their MI premiums.

Deductions are phased out at 10% increments for borrowers with adjusted gross incomes between $100,000 and $109,000.

This new legislation helps low- and moderate-income Americans overcome barriers to homeownership. By making mortgage insurance tax-deductible, Congress is addressing the key issue of housing affordability for many homebuyers.

The new tax code was written so that mortgage insurance will be deductible if you purchase a home in 2007, but will NOT apply to mortgage insurance on existing mortgages.

Depending on your credit, you may also qualify for a loan with less than 20% down with no separate mortgage insurance payment required.