As part of this year’s “Fiscal Cliff” negotiations, Washington passed the American Taxpayer Relief Act of 2012. Part of that act re-instated the tax deductibility of mortgage insurance premiums which was eliminated in 2011. The law covers the fiscal years of 2012 and 2013, which makes it retroactively available for 2012 tax filings even though the original mortgage insurance tax deductibility rules expired more than 12 months ago.
The American Taxpayer Relief Act of 2012 makes it possible for borrowers with itemized federal tax returns and an annual adjusted gross income of less than $100,000 to deduct 100% of their annual mortgage insurance premiums on the federal income tax filings. For borrowers with an adjusted gross income of more than $100,000 per year, deductions are still available, but they phase-out as income levels rise.
Mortgage insurance of all types are eligible for deductions. This includes conventional private mortgage insurance (PMI) from mortgage insurers such as Radian, MGIC and United Guaranty. It also includes mortgage insurance premiums (MIP) due to the FHA and USDA. VA mortgages do not require mortgage insurance.