A Permanent Extension of the Private Mortgage Insurance Deduction?

The tax deduction on private mortgage insurance has been bounced around like hot potato ever since 2007.

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The problem with the lack of predictability in tax deductibility of mortgage insurance is that when people are make decision on which of the four types of mortgage insurance they want on their loan, it’s typically with long term considerations in mind.  This lack of certainty has turned some mortgage insurance decisions into guesswork.  To date, the tax code has provided no long term predictability to aid the consumer in this important and difficult decision.

With the help of Senators Debbie Stabenow and Mike Crapo and the bi-partisan (what the heck is that) Senate Bill 688 (a bill to permanently extend the private mortgage insurance tax deduction), this soon might end and mortgage customers may soon have the clarity they deserve.  Before we look forward, let’s look back:

  • In 2007, congress passes the Mortgage Forgiveness Debt Relief Act which allowed qualified private mortgage insurance to be wholly or partially deducted in accordance with IRS Publication 936 (subject to income restrictions).
  • This benefit expired in 2011 thus punching the housing market in the gut for 2012.
  • The American Taxpayer Relief Act of 2012 extended the Mortgage Forgiveness Debt Relief Act.  This accomplished two things for the mortgage insurance deduction:
    • It retroactively allows qualified private mortgage insurance to be an itemized deduction for 2012 (again, subject to some restrictions).
    • It extends the qualified and itemized mortgage insurance deduction through 2013 (again, subject to some restrictions).

Stabenow and Crapo’s bill strikes the “termination clause” affecting mortgage insurance paid or accrued after December 31, 2013.  In other words, there would be no termination of the deduction if this passes.  It’s that simple; there are 77 words in the bill.  Here’s to hoping that congress does the right thing.

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Charles Dailey – Branch Manager, Loan Officer, Certified Military Housing Specialist – CA DOC, MN DOC & WI DFI

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