Friday, February 09, 2007

PMI deductibility

At the start of 2006, I talked about some important new limits for tax deductions and retirement planning purposes. That was useful information for planning purposes, but may once again be helpful, now that we're in the middle of the tax prep season for the 2006 tax year.

I wanted to hit on one additional item: there has been a fair bit of media discussion regarding the deductibility of Private Mortgage Insurance (PMI) premiums, but there is very little "official" documentation of this development. The deduction stems from the Tax Relief and Health Care Act of 2006, which was passed by Congress and signed by the President late last year. For key provisions of that act, see the White House fact sheet. In any case, the reality for PMI deductibility seems to be that a) right now it is only in effect for 2007, and b) it only applies to loans originating in 2007. In other words, existing mortgages that are subject to PMI do not qualify. The fact that it it is set to expire for 2008 is probably less of a concern, as these laws are often renewed. For the sake of PMI payers, let's hope that this does get renewed, and in the process that renewal includes existing PMI policies.


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