Welcome to Part 2.
What is PMI? If you have a mortgage that has NOT been secured by at least a 20% down payment of the appraised value or sale price, your lender will require that the mortgage to be insured against the possibility of the default of the payments on the loan.
So how does this charge translate on your tax return?
1. On loans taken out from 2007 or later, you may deduct this monthly charge, that is part of your monthly payment, on Schedule A of your itemized return.
***Please note, unless Congress renews the deduction, 2014 will be the last year that this tax deduction will be eligible (Please check with your Tax Advisor for the status of the deduction)
a. If your adjusted gross income is more than $100,000.00 your deduction is reduced by 10% on each $1000.00 ($500.00 for individuals that are married but filing separately) example: if you are making $110,000.00 or more the deduction may not be claimed.
2. There are government insurance fees for loans funded by the FHA, VA & the Rural Housing Services agencies. Some of the fees may be paid in full at time of closing. As their deductions may be complicated and dependent on various contingencies & vary form agency to agency, it is best to consult a tax advisor or other professional resource.
Please check back for Part 3: Prepaid Interest Deduction