NEW TAX BENEFITS FOR 2007-2010 MORTGAGES WITH MORTGAGE INSURANCE
The new tax break is “the qualified mortgage insurance deduction”. It will provide those taxpayers with adjusted gross incomes of less than $100,000, a tax write- off on the full cost of mortgage insurance and those who earn less than $109,000, a write-off of part of it.
Homeowners with a new mortgage that is covered by mortgage insurance will be able to claim a tax break on their mortgage insurance this year. The deduction can be taken for insurance on a principal residence or a second home. The mortgage insurance deduction will especially help first-time home buyers who are unable to put down 20 percent of a mortgage.
The annual tax break from the deduction will be worth around $350 per taxpayer who qualifies with an income of less than $100,000 and those who acquired their loan between 2007 and 2010. About one in 10 residential mortgages is covered by private mortgage insurance.
The new tax deduction can be taken for both private mortgage insurance and insurance provided by the Department of Veterans Affairs, the Federal Housing Administration and the Rural Housing Administration.
Private mortgage insurance only helps to protect the lender, not the homeowner. If a borrower defaults, the lender is unable to recover costs after foreclosing on the loan unless there is mortgage insurance on the loan. With 100% more foreclosure this year compared to last year, more lenders are requiring mortgage insurance these days because of the increased risk in the marketplace.
Mortgage insurance premiums should be reported in Box 4 of Form 1098, which borrowers get from their lenders each year.