Deductible
PrivateMI premiums are tax deductible for many borrowers who purchase or refinance a home.
Many families can enjoy the stability of PrivateMI’s predictable monthly premium and deduct those premiums when they file their taxes.
Families with a household income of $100,000 or less will be able to deduct the full premium cost of PrivateMI, while families earning up to $109,000 can qualify for a reduced deduction.
Affording a 20 percent down payment has been the greatest barrier to homeownership, especially for first–time buyers. Since PrivateMI is deductible for low– to moderate–income Americans, more people can now afford to buy the home they’ve always wanted.
When it comes to financing a home, PrivateMI is today’s smart choice. Use the tools on this web site to see if PrivateMI is right for you, and ask your lender about private mortgage insurance today!
Frequently Asked Questions about the PrivateMI Tax Deduction
Q: How did mortgage insurance premiums become tax deductible?
A: The Tax Code was revised to allow a federal income tax deduction for mortgage insurance premiums for many homes purchased or refinanced between January 1, 2007 and is extended one more year to December 31, 2011. Homeowners who have low down payment loans with mortgage insurance will be able to deduct the cost of their mortgage insurance premiums.
Q: Who is eligible for the tax deduction?
A: This deduction is designed to help low- and moderate-income families. Families must have a household income of $100,000 or less in order to qualify for the full tax deduction. Families with incomes of more than $100,000 and up to $109,000 will be eligible for a reduced deduction. The tax deduction helps families and individuals who rely on mortgage insurance to purchase homes or refinance their home loans.
Q: Is the $100,000 based on gross or adjusted income?
A: The $100,000 is based on a taxpayer’s adjusted gross income.
Q: What is “taxpayer income”? How is this different from “household income”?
A: The income threshold phase-out in the new law is based on the taxpayer’s income for the taxable year. A husband and wife who file a joint tax return are considered to be one “taxpayer.” Income from children living in the household is not included for purposes of the tax deduction.
Q: What loans are covered by this deduction?
A: The federal tax deduction is for qualified loans with mortgage insurance that close between January 1, 2007 and December 31, 2011 and covers those tax years. Loans with mortgage insurance that closed prior to 2007 are not covered.
Q: How much will consumers save as a result of the tax deduction?
A: The average annual tax savings will be between $300 and $350 per family.
Q: Is the deduction only for first-time home buyers?
A: No, the deduction is not just for first-time home buyers.
Q: Is a loan for a vacation home eligible for the mortgage insurance deduction?
A: Yes, “qualified residence” includes the taxpayer’s principal residence and one other residence selected by the taxpayer for purposes of the deduction.
Q: Are there any occupancy restrictions? Does the property need to be owner occupied?
A: The property must be a principal residence of the taxpayer or another residence that is used for personal purposes by the taxpayer.
Q: Are investor loans eligible?
A: No, investor loans are not eligible.
Q: Does the law allow the tax deduction for both purchases and refinances? If so, are there limitations on the refinance terms?
A: This provision parallels the deduction for mortgage interest, which includes refinances up to the amount of the refinanced indebtedness.
Q: When refinancing a piggyback loan, for purposes of the deduction, is the original loan amount considered the sum of the two mortgages or only the primary mortgage amount without the second lien included?
A: The sum of the two mortgages.
Note: MICA cannot provide tax advice. Taxpayers should consult their tax advisor to ascertain if they are eligible to take this deduction. The answers to these questions are based on an interpretation of the language of the statute, the Joint Committee on Taxation’s Technical Explanation of the statutory language, and present law. The Internal Revenue Service will issue guidance interpreting the new provision and could reach different conclusions in the case of some of the issues raised.