The U.S. House of Representatives voted this week making mortgage insurance premiums tax deductible for all mortgages originated for the next three years. The Senate passed this legislation last week by unanimous consent. Mortgage insurance first became tax deductible in 2007.
Eligible homeowners with adjusted gross incomes of $100,000 or less can deduct the full cost of their mortgage insurance premiums under the new legislation. Families with incomes between $100,000 and $109,000 can be eligible for a reduced deduction.
This means that a borrower in a 25% marginal tax bracket who takes out a $300,000 mortgage during the next three years, may see an additional $53 in tax savings* per month or $636 in tax savings* per year, making homeownership more affordable.
You can obtain additional information at the IRS web site, www.irs.gov.
*Tax savings example based on a premium rate of 0.85% on a 100% LTV interest only PLUSSM loan generating annual deductible premiums of $2,550 ($300,000 x 0.85%) multiplied by a 25% marginal tax rate (e.g. married couple filing jointly with taxable income of $63,700 or more) yielding a tax savings of $53 per month in 2007.
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