Mortgage Insurance (MI) deductibility expired at the end of 2011 creating higher costs and uncertainty for buyers.
The American Taxpayer Relief Act restored MI tax deductibility for 2012 and 2013 for filers with an Adjusted Gross Income (AGI) of up to $100,000 according to the National Association of Realtors.
- Lowering the cost of home ownership (including those who wish to refinance)
- Making it easier for borrowers to plan ahead, with clear MI tax deductibility rules in place for 2012 and 2013 tax years
- Allowing current homeowners who are eligible to deduct mortgage insurance premiums made during 2012 on their upcoming tax return
And there’s more good news – the legislation extended the mortgage interest deduction, which saves homeowners more than $100 billion a year, according to published reports.
MI TAX DEDUCTION
In 2009, more than 3.6 million taxpayers claimed an MI tax deduction. For 2012 and 2013, the deduction covers private mortgage insurance and MI through FHA, the VA and the Rural Housing Service.
For tax years 2012 and 2013, the MI tax deduction benefits borrowers (single or filing jointly) who itemize their federal tax returns and have an adjusted gross income (AGI) of up to $100,000. Homeowners in that catagory can deduct 100% of their annual mortgage insurance preimums. Those who are married filing separately can deduct 50% of MI premiums with an AGI of $100,000 or less. At higher income levels, deductibility is subject to a sliding scale.
Purchasers of a single premium MI product can only claim part of the premium during a year (the amortizing portion) – not the entire lump sum.
The rules apply to a “qualified home”, meaning a private residence or a second home that isn’t rented out.