Our industry trade association, U.S. Mortgage Insurers (USMI), recently put out a press release that sliced and diced a new report by the Internal Revenue Service regarding 2013 individual tax returns. USMI reports that approximately 4.7 million taxpayers deducted the full cost of their mortgage insurance premiums in 2013. It also noted that the total estimated net tax benefit topped $900 million, up from approximately $750 million in 2012.
This important deduction directly benefits low- and moderate-income borrowers since it is only applicable for borrowers with an annual household income of less than $100,000. As a matter of fact, 82% of taxpayers who took the deduction in 2013 had adjusted gross incomes between $30,000 and $100,000. The average amount per return rose to $1,387 in 2013, up from $1,304 in 2012.
As an industry, we have long held the belief that mortgage insurance premiums should be treated no differently than mortgage interest. Since it first became available in 2007, the tax deduction has also been widely supported by consumer, business, tax payer, civil rights, civic and labor groups.
Logistically, it continues to be treated as a tax extender. These tax extenders are a set of business and individual tax rules that expire every year or two and, as such, need to be renewed on a regular basis. That said, things are playing out a little differently for the mortgage insurance deduction this year. This summer, the Senate Finance Committee approved S. 1946: Tax Relief Extension Act of 2015, which includes a two-year tax extension of mortgage insurance deductibility rather than the single-year treatment it has received in the past. The House Ways & Means Committee is expected to consider similar legislation in the near future.
Ultimately, our industry would like to see the mortgage insurance premium deduction made permanent, but extending it by two years would be a step in the right direction. If you agree that having the ability to deduct mortgage insurance premiums is a positive for homeowners, we encourage you to reach out to members of the House Ways & Means Committee and let them know you support extending this deduction.Tags: Mortgage Industry, Mortgage Insurance, Tax Deduction