PMI stands for Private Mortgage Insurance. This is an insurance that protects lenders against potential borrower defaults and is usually a requirement for any home loans where the home buyer puts less than 20% down.
Historically, PMI was one of those real estate expenses that could not be deducted, but congress has allowed certain home borrowers to deduct the PMI expense.
But to qualify for the deduction you must have bought or refinanced your home since Jan. 1, 2007. This deduction is only available for PMI premiums paid on the original loan for a property acquired or refinanced between 2007 and 2010 and may be deducted as mortgage interest. Any prepaid mortgage interest must be deducted evenly over 84 months and, therefore, can't all be deducted in the year of payment.
Families with adjusted gross incomes of up to $100,000 can deduct 100% of their insurance premiums, much the same as they deduct property taxes. The deduction is then phased out up to an adjusted gross income of $110,000.
How much is PMI? The annual premiums run about 0.5% to 0.75% of the outstanding balance, $500 to $750 a year for every $100,000 you owe.
So if you purchased your home, condo or townhouse in 2007 or later, do not forget to take advantage of this nice tax deduction if you qualify.
If you are thinking of buying a Pasadena home, Pasadena condo or town home, please give us a call for a comprehensive and free consultation. We can be reached at 626-629-8439.
IRINA NETCHAEV & ASSOCIATES
Pasadena Views Real Estate Team
Pasadena Real Estate Agents
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