A mortgage insurance premium can range from anywhere between 0.3 percent to 1.15 percent of the loan amount per year. Mortgage is required by lenders when the down payment you make on your new home is less than 20 percent of the sales price, and acts as a safety net for the lender should you default on payments. Buying a home comes with plenty of expenses, but there are certain ways to receive deductions for home insurance which will help cushion the financial blow.
Mortgage insurance premium deductions are in effect as a part of the Tax Relief and Health Care Act of 2006, and the mortgage insurance premium became tax deductible in 2007. Since the recovery of the housing market was slower than anticipated by lawmakers, polices for mortgage insurance deduction were extended through 2013, and could be further extended by congress (should they decide a prolonging of the tax break is warranted).
There are, however, complications to keep in mind when claiming a tax deduction for your mortgage insurance premium. The first thing to note before looking into whether or not you are eligible for a mortgage insurance deduction is the date on which you took out your mortgage. If that date happens to be prior to the first of January, 2007, you will not be able to receive a tax deduction on your mortgage insurance premium at the end of the fiscal year.
Another restriction of premium deduction pertains to refinancing your home. Be cautious when refinancing. Mortgage insurance premium deductions can only be applied to refinancing costs up to the amount of the original loan amount, not any extra money that a second loan may accrue. The government has committed itself to certain dedications for home insurance payments, but you have to know exactly what they are in order to benefit from them!