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Private - January 1, 2007 Private Mortgage Insurance Deductibility Rules Murky Recent legislation signed into law allowing some tax deductions on Private Mortgage Insurance (PMI) premiums by homebuyers is filled with more questions than answers as of the writing. As with any tax questions, seek out a particular experienced tax professional. Many in the mortgage industry were caught off guard by the new tax law. Depending on many variables in the legislation, do not take for granted any advice on deductibility from those who do not have a thorough understanding pertaining to the short including long term implications of the legislation. What we do know: -Borrower-Paid Private Mortgage Insurance for eligible borrowers who have mortgage loans funded after January 1, 2007 might be able to utilize the new legislation. -At the time, only eligible purchases qualify. It is still unclear if refinances including rehabilitation loans fall under the legislation. -Early interpretations by those in mortgage industry believe the legislation covers conventional including FHA financing. -The legislation limits the full deductibility to borrowers with a particular adjusted gross income (AGI) of $100,000 or less. In the case of a married individual filing a separate return, the AGI maximum is $50,000. The deduction in gradually phased out for borrowers with AGI’s up to $109,000. Contact a tax professional concerning your own situation. -The current legislation specifically states that unless the legislation is extended, it could expire on December 31, 2007. -Taxpayers who wish to utilize the new legislation must itemize on their tax return to receive the benefit. -Deductibility issues are between the borrower including the Internal Revenue Service. Mortgage loan originators could be reluctant to provide individual tax advice on the new legislation. Borrowers should seek out qualified tax consultants for advice.
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