The resurgence of private mortgage insurance continues — if only because it’s aided by Congress.
For eligible homeowners, lawmakers voted to extend the tax-deductibility of PMI through 2010. The law was previously scheduled to expire at the end of 2007.
For all loans originated prior to December 31, 2010, and within those years, private mortgage insurance is 100% tax-deductible provided that two tests are met:
- The homeowner’s household income is $100,000 or less in the calendar year
- The home loan is for a primary or secondary residence
For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000.
So, if a single person earns $90,000 in 2007 and buys a home using PMI, the PMI expenses are tax-deductible in 2007. If that person’s income exceeds the threshold prior to 2010, the deduction is phased out.
As always, talk with your tax professional about how tax deductions work and whether you qualify for a PMI deduction.