PMI may be deductible in 2007

Proposed legislation in both the House of Representatives and the US Senate include provisions granting a federal income tax deduction for mortgage insurance.

The deduction will apply for new loans closed in 2007 (and beyond) and is restricted to taxpayers with income under $100K. I am guessing that the taxpayer will still have to itemize deductions on Schedule A to take the deduction. Older loans will not be eligible for the mortgage insurance deduction.

This proposed tax law change affects owner-occupant homeowners only. Under the current law, mortgage insurance on a first or second home is a personal expense and not an allowed deduction on Schedule A.

Of course, rental property investors have always been able to deduct mortgage insurance premiums on Schedule E.

i might have to consider a refi if this happens. i went 80/20 to avoid PMI. PITI comes out about the same, but i get to deduct more with the 80/20.

smart lobbying by the banks…