The United States Congress passed new legislation extending a tax provision that allows homeowners to deduct the cost of mortgage insurance premiums from their federal income tax returns through 2010.
“This legislation has the potential to help thousands of low- and moderate-income Americans secure affordable mortgages that keep them in their homes and keep their communities strong,” Steve Smith, Chief Executive Officer of The PMI Group, Inc. and PMI Mortgage Insurance Co., said in a press release.
“The median home price in the United States today is over $200,000, which means borrowers would need to save more than $40,000 in order to make a traditional down payment of 20 percent. Making the cost of mortgage insurance tax deductible for qualified borrowers creates opportunities for more Americans to secure safe, predictable mortgage loans with a down payment of as little as 3 to 5 percent,” Smith added.
The cost of mortgage insurance first became tax deductible for transactions, such as home purchases and mortgage refinances, closed in 2007.
Borrowers with adjusted gross incomes below $100,000 were able to deduct 100 percent of their mortgage insurance premiums paid between January 1 and December 31, 2007, while families with incomes up to $109,000 were eligible for a partial deduction.
“On average, this annual tax break amounts to $350 per taxpayer. That’s cash in the pockets of hard working homeowners,” said Kevin Schneider, president of the U.S. mortgage insurance business for Genworth Financial, Inc, in a statement.
The legislation is part of the Mortgage Forgiveness Debt Relief Act of 2007 approved by both the U.S. House of Representatives and the U.S. Senate, and now goes to President Bush for final approval.