Tuesday, January 10, 2012

Mortgage Insurance Tax Deduction Out

In the process of haggling over a 2 month extension of the payroll tax reduction (which is increasing mortgage rates, see my Dec 30, 2011 posting), Congress failed to extend a number of existing tax deductions. One of those deductions that is no longer in effect is the deduction for mortgage insurance.

When a home buyer puts less than 20% as a down payment, they have to pay a mortgage insurance premium. Mortgage insurance is a policy that pays the lender a claim in the event a borrower defaults on the loan. Up until midnight on New Years Eve, that premium was tax deductible.

Congress may extend the deduction and make it retroactive to the beginning of the year. But many of the tax deductions are considered bad policy by tax experts and may not be in favor. So for the time being, mortgage insurance is not a tax deduction.