Mortgage Insurance Premium Deduction
As a homeowner, you need to understand that you can save a lot of money by deducting your PMI premiums, but there are certain things that should be done to get your mortgage insurance premium deduction.
If you have been paying for this type of insurance on a monthly basis because you put down around 20% on your house, it’s possible to get a part of this amount back by claiming this deduction on federal income tax returns.
The good news is that many homeowners are already familiar with the tax breaks that can be claimed.
Mortgage Insurance Premium Deduction – Basic Facts You Should Know
There are many extra costs that come with buying a new house, and if you can’t make down payments of as minimum 20% of its purchase price, one of these costs is your PMI or private mortgage insurance.
Basically, it’s all about the coverage that you need to pay as a house buyer, and its main function is to protect lenders if you fail to pay off your home loan.
Some PMI payers are eligible to use their insurance payments as certain tax deductions, but it’s necessary to file for their returns.
Mortgage insurance premium deduction originated in 2007, and the government extended it in 2014. It’s possible to benefit from it for the policies issued by private insurance companies.
Why It Is Counted as Interest
Many house owners decide to itemize their deductions because their property tax and mortgage interest payments exceed the regular deduction amount that they are eligible to claim.
- Related: Home Mortgage Protection Insurance
What PMI amount can you claim?
You should contact your lender or check insurance documents to find out.
Important Requirements That Must Be Met
It seems quite easy to claim your MPI deduction, but you need to ensure that you can meet all important requirements before getting started.
First, take into consideration the date when you paid your mortgage insurance because this beneficial opportunity is available only to those homeowners who took out their mortgage after 2007.
This means that no premiums can be deducted if they are connected with the home loan taken before this date.
The best part is that all associated MPI premiums on all mortgages issued in 2014 can also qualify for this mortgage insurance premium deduction. Besides, if you refinanced your house after 2007, you also qualify for it, but you should be quite careful when structuring your refinance.
That’s because it can be applied to the one of your original loan amount, but not to any extra money obtained with new home loans.
Finally, you can deduct your PMI payments on the second house loan, but it must be issued after 2007 according to a general requirement.
Mortgage Insurance Premium Deduction 2017