Foreclosure
12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!
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12 September 2007
Foreclosure doesn't just happen to people who don't make their mortgage payments. Your homeowner's association (HOA) can take your house or condo if you're not careful. In one case, a disabled California man lost his home in a foreclosure sale because he was $123 behind on his homeowner's dues. The house was worth $280,000. Unfair? Abusive? You bet!Read More »
IRS Eases Private Mortgage Insurance's Bite
By Kelly WingardNFNS Columnist
Uncle Sam wants you — to own a home. Mortgage interest, qualified home equity loan interest, and real-estate taxes have long been deductible items. The IRS even allows first-time homebuyers to withdraw IRA funds free from penalty. Now congress has added a new incentive to persuade taxpayers to take the mortgage plunge: Starting in 2007, qualified taxpayers may deduct the cost of private mortgage insurance from their taxable income.
What Is Private Mortgage Insurance?
Private mortgage insurance (PMI) protects lenders in the event of foreclosure, allowing them to recapture the principal loan amount plus costs when buyers are unable to repay. Lenders generally require homebuyers to pay for PMI when financing more than 80 percent of their purchase with a new home loan.Premiums for PMI vary depending on the amount of the loan and buyer's down payment. They typically range from a .5%–1% of the mortgage, running about $45 per month for a $100,000 mortgage with a 5 percent down payment. Lenders waive PMI for buyers who make larger down payments because these homeowners have established more home equity and are less likely to walk away from their investments.
Who Qualifies to Deduct Private Mortgage Insurance Premiums?
The IRS is lessening the sting of PMI premiums by allowing qualified taxpayers who acquire new home loans in 2007 to deduct premiums as itemized deductions. A qualified loan must be incurred for home-acquisition debt, that is, the mortgage must be taken out to purchase a home, as opposed to a home equity loan, which can be used for any purpose. Qualified taxpayers must have adjusted gross income (AGI) of less than $100,000 ($50,000 if married and filing separately) to receive a full deduction. The deduction is reduced by 10 percent for every $1,000 ($500 if married and filing separately) over the AGI limits.Sources
Internal Revenue Service
Chicago Tribune
Federal Reserve Bank of San Francisco
About the Author
Kelly Wingard is a freelance writer and a 25-year veteran tax preparer. She contributes regularly to the University of Illinois Tax School training manual for tax professionals.
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