Tax season is approaching. Do you know where your deductions are?
As a homeowner, you can claim a number of write-offs to lower your tax bill, among them deductions for mortgage interest, mortgage points and real-estate tax payments. But a key mortgage financing benefit quietly slipped through the floorboard cracks at the end of December. You might not have heard about it because of all the screaming and yelling in Congress about the payroll tax cut extension that was hotly debated across both sides of the aisle.
But though its demise drew little attention, it affects a lot of people, perhaps even you, and the loss of the tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could effectively increase the costs of homeownership in 2012.
The expiration of mortgage insurance deductibility will hit many low-down-payment conventional loans originated since 2007, plus nearly all new mortgages closed this year whose down payment is less than 20 percent. Though precise numbers aren’t available, estimates range into the millions for existing owners and new buyers potentially touched by the deductibility termination. Borrowers using guaranteed veterans and rural housing loans, whose down payments can drop to zero, also are affected.
The mortgage insurance premium deduction dates to legislation enacted in 2006. It allows buyers and refinancers who use either private mortgage insurance or federal insurance or guarantees, and who itemize on their federal tax returns, to write off their premiums. Borrowers who are single or married and filing jointly with adjusted gross incomes of $100,000 or less can write off 100 percent of their annual mortgage insurance premiums. Married homeowners filing singly can write off 50 percent of premiums. Borrowers with incomes above $100,000 may qualify for partial deductions on a sliding scale.
The mortgage insurance deductibility problem might disappear, analysts say, if mortgage insurance gets included in an election-year “extender” package. But the fee increases on most new mortgages that were part of the extension of the payroll tax cut are here for the foreseeable future, so factor them into your housing budget.
Comments