Deduction for Private Mortgage Insurance Premiums Extended Through 2016

Set to expire in 2015, the PMI deduction gets one more year of life.

In order to address the many popular tax breaks that were due to expire at the end of 2015, Congress passed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). Among the over 100 provisions it contained was one that will be welcome to owners of real estate: It allows those who itemize their taxes and whose mortgage lenders require them pay for private mortgage insurance (PMI) to deduct the premiums, through 2016.

Understanding private mortgage insurance: When you borrow money with which to buy a home, but make a down payment of less than 20% of the purchase price, you can probably expect your lender to require you to purchase PMI. The underlying reason is that mortgages with down payments of under 20% are considered riskier than loans with larger down payments. Although the mortgage insurance protects the lender from the possibility that you will default on your payments, you, the homeowner, must pay the premiums. The amount will be based on the price you paid for the home.

Eligibility for the tax deduction. If your household has an adjusted gross income of $100,000 or less, you should qualify for the full tax deduction. If your household incomes is between $100,000 and $109,000, you will be eligible for a partial deduction. If your household income is higher than $109,000, the deduction is not available to you. To find out more, see the IRS's publications Home Mortgage Interest Deduction and Publication 53: Tax Information For First-Time Homeowners, available at www.irs.gov.