Like most people, you want to keep more of your hard-earned money in your own pocket. Part of doing this is finding ways to save money on your tax return. Often, medical and dental insurance premiums are tax-deductible, so you may wonder about insurance premiums for your home. To trim your tax bill, take a look at private mortgage insurance deductions.
Private mortgage insurance is coverage you buy to protect the lender. In the event you default on your mortgage, this type of insurance enables your lender to collect money to recoup its losses. In most cases, you'll have to buy this type of insurance only if you put less than 20 percent down on your home. If you put the big bucks down, you can skip it.
The IRS will allow you to deduct private mortgage insurance premiums for insurance contracts you entered into in or after 2007. Premiums paid for older contracts are not tax-deductible unless a portion of the premiums were prepaying for an eligible tax year. For example, if you prepaid for the current tax year, you can likely deduct the premiums applicable for the current tax year. You can deduct the premiums using IRS Form 1040, Schedule A.
Married Filing Jointly
If you're married and filing a joint tax return, you can deduct 100 percent of the private mortgage insurance premiums, provided you meet some conditions. First, your adjusted gross income cannot exceed the threshold set by the IRS for the tax year in question. If your income exceeds the threshold amount, your deduction will be reduced by 10 percent for every $1,000 in additional income you have. When you exceed the current tax's years maximum income, there's no deduction for you.
If you're filing an individual tax return, you can deduct 100 percent of your private mortgage insurance premiums up to the threshold amount set for individuals. This threshold income is less for an individual than it is for a married couple. Additionally, if you pass the threshold income amount for an individual, you can deduct only a portion of your premiums.
Refinancing can help you lower your mortgage payments, and you might even get a tax deduction out of it. If you refinance and purchase private mortgage insurance, some of your premiums may be tax-deductible. You can deduct the portion of the premiums that apply to the mortgage amount when you purchased the home rather than the mortgage refinance amount.
Subject to Change
Tax laws and deduction rules are subject to change. To make sure you can deduct premiums and to determine the amounts that are deductible, check the IRS website for updated information. You may also consult with a tax preparer or accountant for year-by-year details.
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