Good News! Mortgage Insurance Premiums Tax Deductible in 2016
February 5, 2016 / Troy Rampy, Regional Vice President—Central Region
As tax time approaches, there's good news for millions of families and individuals who own a home or are considering a home purchase. Congress recently extended tax deductibility for mortgage insurance (MI) premiums through 2016.
The 100 percent deduction on MI premiums lowers the cost of home ownership for eligible tax payers who made a home purchase in the last nine years or who buy a house during 2016.
Eligibility is fairly straightforward. If you get questions, here are some elements that are important to emphasize:
- MI premiums may be tax deductible for those who purchased a home on or after January 1, 2007.
- Homeowners with a household income of $100,000 or less can qualify for the full tax deduction.
- Households with incomes of more than $100,000 and up to $109,000 may be eligible for a reduced deduction.
- The property must be a principal residence of the taxpayer or another residence that is used for personal purposes by the taxpayer.
In addition to MI premiums, deductibility of mortgage interest was also approved for 2015 and extended through 2016. For those interested in purchasing a home in 2016, these deductions add to the benefits of being a homeowner rather than a renter.
With rents rising, it's less expensive to buy a home in almost every area of the country than it is to rent—even before factoring in price appreciation and building equity, which benefit homeowners.
MI tax deductibility adds to the options and flexibility MI provides, including:
- MI enables qualified borrowers to purchase a home sooner with a lower down payment than the 20 percent required by many mortgage lenders.
- Experts estimate that it takes prospective home buyers an average of more than 10 years to save enough to pay 20 percent down.
- Using MI can mean the buyer needs less cash at closing. A financed premium plan or one like United Guaranty's monthly premiums can reduce closing costs even more.
- Private mortgage insurance is cancelled automatically once the loan balance is scheduled to drop to a predetermined equity level (78 percent. For additional information, refer to the Homeowners Protection Act of 1998).
More information on tax deductibility is available on United Guaranty's Deduct Your MI Premium page. United Guaranty also provides resources for home buyers, including a detailed comparison of the costs of Buying a Home versus Renting.
Troy Rampy has been United Guaranty's Regional Vice President of Production in the Central Region for 20 years and is a six-time member of United Guaranty's President's Club. He has 37 years of experience in the mortgage industry. Rampy directs a team of 16 sales professionals in Texas, Oklahoma, Colorado, Kansas, Missouri, Arkansas, Louisiana, Mississippi, New Mexico, and Southern Illinois. He is a member of the national Mortgage Bankers Association and the organization's chapters in Texas, Colorado, Oklahoma, Missouri, and Louisiana.
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