Congress has recently restored the mortgage insurance (MI) tax deduction for 2018–2020, providing even more incentive for Michiganders to purchase a home or refinance.
Borrowers with adjusted gross incomes below $100,000 per year can deduct 100% of their insurance premiums on their federal tax returns. Borrowers with incomes between $100,000 and $109,000 will be able to deduct a portion of their insurance payments.
This new legislation creates a large group of eligible borrowers, considering Michigan’s median household income was $56,697 in 2018, according to recent census data.
This policy is even more beneficial in a housing market where prices are continually rising, because it lowers the cost of homeownership for new buyers and refinances. Mortgage insurance or PMI is often unavoidable as it’s required for homeowners who put down less than 20% for a down payment. But now with the extended tax deduction, eligible buyers can keep more of their hard earned money in their pocket and still invest in homeownership.
How Was the MI Premium Tax Deduction Restored?
The MI tax deduction expired after 2017, but in January 2019, Rep. Julia Brownley, introduced a bill called the Mortgage Insurance Tax Deduction Act of 2019. The bill proposed to extend the MI deduction and apply it retroactively to the 2018 tax year.
Another bill called the Tax Extender and Disaster Relief Act of 2019, proposed to treat mortgage insurance premiums as qualified mortgage interest through the 2019 tax year.
But the bill that actually extended the MI deduction is the Further Consolidated Appropriations Act, 2020, introduced by Rep. Bill Pascrell Jr. in March 2019, and signed into law in December 2019.
How Do I know If I’m Eligible?
As mentioned, eligibility will be determined based on gross income and borrowers will need to make less than 109,000 per year in order to qualify for the deduction.
There are no loan limits and the deduction is available to both first time buyers and current homeowners.
The MI deduction is available for all loan types except for investor loans.
Consult with a Lender in Rochester, MI to See if You’re Eligible
For more information, or to see if you qualify for the MI tax deduction, contact Julie Krumholz in Rochester, Michigan.
Julie has been helping homebuyers for over 30 years and has several loan programs available for various incomes and financial situations.
If you are looking for a mortgage lender in Rochester, MI or anywhere throughout Michigan, call Julie from Main Street Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have about a new purchase or refinance.