CABOR Shares How to Get Your PMI Deduction

Home owners who are eligible to deduct private mortgage insurance, or PMI, premiums can shave hundreds of dollars off their income tax bills, according to Joanne Zettl, Chairwoman of the Cleveland Area Board of REALTORS® (CABOR).

If you put down less than 20 percent on a house, expect to be required to purchase private mortgage insurance, which protects the lender in the event you default on the home loan. That is a good deal for the lender, considering you are the one paying the PMI premiums.

But PMI is also a good deal for aspiring home owners. Many people, especially first-time buyers, cannot come up with big down payments. PMI encourages lenders to give them mortgages anyway.

It is important that you do not pay the insurance a day longer than you must. By canceling PMI as soon as you are entitled to can save you thousands of dollars. For eligible home owners, deducting the premiums come tax time can save hundreds more.

Getting the PMI tax deduction

Starting with loans issued or refinanced in 2007, and continuing through 2013, you can deduct each year’s premiums paid on PMI for your principal residence and for a non-rental second home.

The deduction begins to phase out once your adjusted gross income reaches $100,000 ($50,000 for married filing separately) and disappears entirely at an AGI of $109,000 ($54,500 for married filing separately).

In general, you can only deduct the premiums paid for the current tax year. If you pre-paid premiums for future years, that portion must be allocated to those future years. Rules can vary for mortgage insurance provided by the Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service, so consult a tax adviser.

To claim the PMI deduction, you must itemize you return. Enter qualified PMI premiums on Line 13 of Schedule A. The IRS instructions for Schedule A include a worksheet for home owners subject to the income phase-out. Basically, you will lose 10% of the deduction for each $1,000 over the $100,000 AGI limit you are.

Zettl recommends that if you have questions or concerns about your PMI tax deduction you should consult a tax professional. And remember, if you are in the market to buy or sell a new home contact a REALTOR® professional.


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