Yes, it’s that time of year again…Tax Season!  If you’re a Maplewood NJ homeowner, you may be able to deduct your PMI (Private Mortgage Insurance) from your taxes at tax time.  PMI is the insurance required of buyers by lending institutions when you borrow more than 80% of the sales price (put less than 20% down).  This insurance is meant to protect the lender in case you, the borrower, default on your loan.  While this is good for loan companies, it can also good for the homeowner since you may be able to deduct your premiums at tax time.

In 2007, the government began to allow deductions for all homeowners in New Jersey and around the country, including those who refinanced their homes that year, to begin deducting the premiums for PMI from their taxes.  Originally, it was only meant as a deduction for that year.  However, it has continued to be extended up through 2011 premiums.  There is no guarantee that it will be allowed on 2012 premiums as of the time of this post.  If you did pay PMI last year (2011) and your Maplewood NJ household income is below $100,000 (married filing jointly) or $50,000 (married filing separately), you may be able to deduct all your PMI premiums paid for 2011.  If you have prepaid your PMI for future years, you cannot deduct them for the current year’s tax filing.  If your household income is between $100,000 and $109,000 (married filing jointly) or $54,500 (married filing separately), you may be able to deduct a portion of your PMI premiums for 2011.  Any household with an income higher than $109,000 (jointly) or $54,500 (separately) is not eligible for the deduction.

In order to deduct your PMI premiums from your taxes, you will need to submit an itemized return (Schedule A).  All qualified PMI premiums should be entered on line 13 of your Schedule A form.  Talk to your accountant or tax preparer about this before you submit your 2011 returns.  They will be able to answer any and all questions you have.  You will also want to discuss your options with your tax adviser because rules for PMI vary with every type of loan.

Being allowed to deduct your PMI at tax time is nice.  However, it’s even better not to have to pay PMI any longer than you need to.  Talk to your mortgage company to find out when you are no longer required to carry PMI on your mortgage loan.  You don’t want to have to pay any longer than you need to, especially since there is no guarantee that the tax deduction for PMI will continue to be extended.

* This post is meant for information purposes only.  I am not a CPA nor a tax specialist. 

Francine Lichtman, Real Estate Beyond Four Walls, New Jersey Homes