For tax years 2007-2011, your private mortgage insurance premiums are tax deductible. Originally this tax break was enacted during the Great Recession to make purchasing a home more attractive, and was later extended through 2011. However, it has not yet been extended through 2012, and there is no way to know whether that will happen or not.
There are several restrictions on who can claim a mortgage insurance deduction. To be eligible, your mortgage must have started on or after January 1st, 2007. Any mortgages started earlier than that date are not eligible for tax deduction. If your original mortgage started before that date, but you have since refinanced you might be eligible if the new loan amount is equal to or less than your original loan amount.
Even if you are eligible for a PMI tax deduction, there are still income restrictions that could limit your deduction. If your filing status is single or married filing jointly and your AGI is more than $100k, or if your AGI is more than $50k when married filing separately your return will be subject to phase outs. For every $1000 you make above your limit, there is a 10% reduction on your PMI deduction. The tax break will be almost completely gone for home owners making more than $109,000 or $54500 respectively.
Claiming the reduction is easy. Your lender will send over a 1098 form that will include the amount of mortgage insurance you paid during the year. If you are eligible for the reduction then you can include the amount you paid your Schedule A under interest paid.
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