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Mortgage Insurance Deduction Set to End

Mortgage Insurance Deduction Set to End
Daniel Cohen
UpdatedMar 1, 2024
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    2 min read
Key Takeaways:
  • Law allowed homeowners to deduct PMI and MIP expenses.
  • Congress failed to extend the law, so it expired at the end of 2011.
  • Homeowners should expect to pay $600 to $1,000 more in taxes in 2012.

Due to Congressional Inaction, the Mortgage Insurance Deduction Ended

At the end of each year, a flurry of bills flow through Congress that extend tax-related laws that have a year-to-year lifespans. The Tax Relief and Health Care Act of 2006 is one such law, which has provisions ranging from tariffs on shoes and chemicals to the income tax deduction for homeowners who pay private mortgage insurance (PMI) and federal mortgage insurance (called "MIP").

In 2011, Congressional bickering resulted in the passage of very few bills, including an extension to the Tax Relief and Health Care Act of 2006. Unless Congress acts, people who itemize on their taxes and pay mortgage insurance will not be allowed to deduct their insurance premiums on their 2012 income taxes. This will result in an increased tax bill of $600 to $1,000 per family, according to one estimate.

Mortgage Insurance Deduction in 2011

According to the IRS, homeowners can deduct PMI premiums paid or accrued during the 2011 tax year on Form 1040, Schedule A, Line 13. The mortgage servicer or PMI provider reports the amount paid in Form 1098, box 4, which is mailed to the homeowner.

For the 2011 tax year, the following qualifications are required to deduct PMI:

  • Paid or accrued January 1, 2011, to December 31, 2011
  • Borrower bought or refinanced home
  • The adjusted gross income (AGI) is $100,000 or less ($50,000 if married filing separately): full deduction
  • The AGI more than $100,000 ($50,000 if married filing separately): reduced deduction
  • The AGI more than $109,000 ($54,500 if married filing separately): no deduction

According to the IRS, payments made during 2011 for qualified mortgage insurance can be treated as home mortgage interest. The insurance must have been in connection with home acquisition debt, the insurance contract must have been issued after 2006, and the taxpayer must have paid the premiums before 2012 for coverage in effect during 2011.

To learn more about which expenses homeowners can and cannot deduct from their income taxes, see IRS Publication 530, and Publication 936.

The Latest on Mortgage Rates

Mortgage rate fluctuations should come as no surprise. If you are buying a home or refinancing your existing mortgage, it is important to stay informed about the current mortgage rates.

Mortgage rates February 21, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of February 21, 2024 stands at 6.9%. This reflects a 13 basis points increase from the previous week's rate.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.
Additionally, Freddie Mac reports that the 15-year mortgage rate for February 21, 2024 is 6.29%, indicating a 17 basis points increase from last week’s rates.

What does the mortgage rate mean for you?
Mortgage rates play a vital role in determining your monthly payment. Let's take a look at the avergage interest rates (APR) for February 25, 2024 based on Zillow data for borrowers with a high credit score (680-740) in the United States:

  • For a 30-year conventional loan, the interest rate is 6.88%.
  • If you opt for a 15-year conventional loan, the interest rate stands at 6.08%.
    Using the rates mentioned above, a $279,082 30-year-year mortgage would result in a monthly payment of $1,834. On the other hand, a 15-year mortgage would require a monthly payment of approximately $2,367.

Experience a smooth mortgage process: Shop around and get pre-approved today!
Shopping around for mortgages and getting pre-approved can make your home-buying or refinancing process easier. Ready to take the plunge? Check Out mortgage rates now for the best options available.