Can you still deduct your Private Mortgage Insurance on your Taxes?

It’s pretty exciting when you’re looking for your home and getting your financing in order. There are so many things to know and do, it can be overwhelming.

What if you don’t have enough money to make a large down payment? Are there still ways to purchase a home in the Cedar Rapids and surrounding area?

Your lender may have a solution requiring Private Mortgage Insurance, if 20% is not available for down payment on the purchase of your home. Private Mortgage Insurance (PMI) is actually an insurance policy taken out in for the bank in case a buyer (you) defaults on your loan. It’s taken out for the bank, but it is paid monthly by you, the borrower.

Once 20% equity of the home is acquired, the PMI can be removed if an appraisal shows there is 20% equity in the home. PMI can also be removed by making enough mortgage payments to equal 20% or more equity in the house.

The fiscal cliff bill Congress passed at the beginning of this year states homeowners who pay PMI each month with their mortgage may continue to deduct those PMI payments from their taxes (up to $500,000 for couples and $250,000 for individual). Since Congress extended the tax deductions for all mortgage insurance premiums and for state and property taxes, these are something home owners and buyers should consider when buying their home and at tax time..

Government insured loans like FHA, VA, and Rural Housing service pay the premium up front at closing so it could get a little complicated when deducting them from your taxes.

If you have any questions with your taxes or your PMI, please consult a professional.

If you have questions about how to get started in buying a home in the Cedar Rapids and surrounding area, call 319-480-5262 and I’ll outline where you need to start and what you need to do.