Real Estate Taxes
posted on 11 May 2007 |
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New Law Gives Many 2007 Home Buyers First-Ever Federal Tax Deduction for Mortgage Insurance Premiums
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(ARA) - Home buyers have something new this spring to factor into
their home financing calculations: A new federal tax deduction
allows many qualified families to write-off premiums for private and
government mortgage insurance on loans that close in 2007.
This is the first time that homeowners who have low down payment
loans with mortgage insurance will be able to deduct the cost of
their mortgage insurance premiums, and the average annual tax
savings for qualified families will be between $300 and $350.
The new deduction, passed by Congress and signed into law by
President Bush late last year, is effective for the 2007 tax year.
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Under the new law, private mortgage insurance (PrivateMI) premiums
are now fully tax deductible for borrowers who buy or refinance a
home this year if their adjusted gross income is $100,000 or less.
Families with incomes of more than $100,000 and up to $109,000 will
be eligible for a reduced deduction.
"Making the cost of mortgage insurance tax deductible helps those
who need it most: low- and moderate-income Americans, primarily
first-time home buyers, who are financially responsible but simply
don't have the means to amass a 20 percent down payment," says Steve
Smith, chief executive officer of The PMI Group, Inc. and President
of Mortgage Insurance Companies of America (MICA).
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Under the new law, private mortgage insurance (PrivateMI) premiums
are now fully tax deductible for borrowers who buy or refinance a
home this year if their adjusted gross income is $100,000 or less.
Families with incomes of more than $100,000 and up to $109,000 will
be eligible for a reduced deduction.
"Making the cost of mortgage insurance tax deductible helps those
who need it most: low- and moderate-income Americans, primarily
first-time home buyers, who are financially responsible but simply
don't have the means to amass a 20 percent down payment," says Steve
Smith, chief executive officer of The PMI Group, Inc. and President
of Mortgage Insurance Companies of America (MICA).
The tax change to give a deduction for mortgage insurance comes at a
time of changing real estate market conditions and regulatory
warnings about the risks of exotic loans.
Mortgage insurance plays a crucial role in maintaining the stability
and continued health of the mortgage finance system. With rising
interest rates and slower appreciation of home prices, many people
who used exotic loan structures are being surprised with higher
monthly payments.
Compared to other financing options, a mortgage loan with PrivateMI
is often more affordable and its fixed, predictable premiums provide
consumers with peace of mind -- and now a tax deduction. And
PrivateMI is cancelable once the homeowner has built up enough
equity in the home.
Private mortgage insurance premium prices vary based on the size of
the down payment, type of mortgage and amount of insurance coverage.
The cost of PrivateMI for a median-priced home -- the projected
national median price in 2007 for a single family home is $224,500
-- ranges from $50 to $100 per month.
"This new tax deduction will make loans with private mortgage
insurance even more attractive for home buyers who are on the cusp
of homeownership," says Suzanne Hutchinson, MICA's executive vice
president. "The wide-ranging group of organizations that support
this important tax break will certainly be working to extend the
deduction beyond 2007."
Consumer groups have had high praise for the new law.
"Homeownership contributes substantially to social stability," says
Bruce Hahn, president and CEO of the American Homeowners Grassroots
Alliance. "Yet homeownership remains just beyond the grasp of
millions of Americans. Making the cost of mortgage insurance tax
deductible helps put homeownership within reach for many more
families."
Tax day in April 2008 -- when taxes are filed for 2007 -- could
bring new benefits to qualified home buyers who will buy or
refinance homes this year with tax deductible private mortgage
insurance.
"This tax deduction will create important social benefits by
offering relief to over-burdened taxpayers," says John Berthoud,
president of the National Taxpayers Union. "Finally, homeowners will
have the ability to make all the costs associated with the ongoing
financing of their home truly tax deductible."
Advocates for African American and Hispanic groups also note the
benefits of the new tax break.
"A tax deduction for mortgage insurance premiums will go a long way
to help homeowners and potential homeowners who simply want to own a
piece of the American dream," says Marc H. Morial, president and
chief executive officer of the National Urban League. "I
congratulate both the U.S. House and the Senate for doing what's
right to make the goal of affordable homeownership a reality for
every American."
"Currently, many Latinos need loans with private mortgage insurance
because they are unable to afford the 20 percent down payment
traditionally needed to buy a home," says Guarione M. Diaz,
president and CEO of the Cuban American National Council. "Policies
such as this one help these families realize the aspiration of
homeownership and fulfill an essential element of the American
dream."
"With a U.S. Hispanic homeownership rate of 48 percent (20 points
below the national average of 68 percent), this legislation would
enable more hardworking Hispanic families and consumers to become
homeowners," says Manny Mirabal, president and CEO of the National
Puerto Rican Coalition. "An estimated 33 percent of the families
benefiting from this tax deduction would be minority homeowners."
(ARA)
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Source: ARA |
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