As you might be aware, mortgage insurance is insurance used to compensate investors or lenders in the event of a default on mortgage loans. This insurance is usually used in lieu of a 20 percent standard down payment, since some people, especially first time home buyers, cannot afford that.
These insurance policies came under increased scrutiny after the subprime US mortgage crisis. It is possible to get mortgage insurance premium deductions, but not everyone is eligible. Here is how to determine if your insurance can change how much you pay in taxes.
1. Is your adjusted gross income less than 100 thousand dollars? You are applicable for putting this as a Schedule A itemized deduction. However, this is only for primary residences, not second homes. Higher incomes do not apply for this or have been phased out depending on the amount.
2. People with FHA loans and private mortgage policies can qualify. You need to take the amount you paid and divide it by either 84 months, or the total months of the life of your loan if it is shorter than 84. If you paid, for example, five thousand dollars for your mortgage insurance premium and six months have passed, then you have a mortgage insurance deduction of about 357 dollars.
3. If you are a veteran or the surviving spouse of a veteran and qualified for a VA housing loan, then your payment is completely deductible. The same goes for any home owners that qualified for the USDA rural housing loan program.
4. Mortgage insurance premium deductions are generally available for people who paid a very large upfront insurance premium. If you did not pay an upfront fee, you probably get a monthly payment policy, which is eligible for different deductions than the dedications for mortgage insurance premiums.