Mortgage Forgiveness Act of 2007 also extends pmi tax reliefThe Mortgage Forgiveness Act of 2007 has taken significant action on the deductibility of premiums for private mortgage insurance and on changes to taxes on capital gains on the sale of a principal residence.
One section of the new law extends until 2010 the provision that allows certain home and apartment owners to deduct from their federal income taxes the amount of the premiums they pay for private mortgage insurance.
'The new law will help people who are on the cusp of home ownership by enabling them to lower the after-tax cost of owning a home,' said Jeff Lubar, a spokesman for the Mortgage Insurance Companies of America, an industry organization in Washington.
Lenders typically require a home buyer to take out private mortgage insurance - P.M.I. for short - when his or her down payment is less than 20 percent. The cost of such insurance can run to hundreds (or even thousands) of dollars a year, depending on the amount of the mortgage and down payment.
Historically, P.M.I. premiums were not deductible on federal tax returns, but in late 2006, the law was changed to allow the deduction for the 2007 tax year. The new law extends the deduction through 2010.
Kevin Schneider, the president of the insurance organization, says the deduction is available to families with an adjusted gross income of $100,000 or less. Families with incomes up to $109,000 get a partial deduction. On average, he said, the tax break is worth about $350 each year.
This bill will allow homeowners with pmi to continue the 2007 move allowing homeowners to save on taxes by deducting it on their year end returns. Additionally, provides the ability for new home buyers with little or no down payment to take advantage of this deduction while paying pmi.
