PMC Mortgage Lender's Blog

Bankrate.com – As the calendar rolls over to 2011, many potential home buyers in the New Year can take advantage of one of the best home buying opportunities in a lifetime.

With their purchases comes the joy of owning a new home and the added responsibility of home maintenance and yard work, but also tax deductions for home-related expenses.

Recently passed legislation now extends Mortgage Insurance (MI) deductions through December 31, 2011.

This makes it a great time to tell your customers how they can use MI to buy a home sooner and enjoy predictable payments, with the added benefit of deducting the premiums from their income taxes. And MI can be canceled once the home buyer builds enough equity.

Details on tax deductibility for MI remain unchanged:

• Loan must close between January 1, 2007 and December 31, 2011;
• Household income must be at or below $100,000 for a full deduction of premium (deduction is reduced 10% for each $1,000 over $100,000);
• The premium deduction is prorated in the first year based on the month the loan closes;
• Deduction applies to the primary residence and one other personal use residence;
• Monthly, annual, and single MI premiums are eligible. Financed premium deductions should be taken over a seven year period.

Mortgage Interest – The bulk of a new homeowner’s monthly payment is comprised of interest and it’s all deductible. For loans more than $1 million, the IRS will limit your interest deduction.

Interest tax breaks don’t end with your home’s first mortgage. If you pull out extra cash through refinancing or get a home equity loan or line of credit, these equity debts, in general, are fully deductible if they are $100,000 or less.

Own multiple properties? Mortgage interest on the second home is also fully deductible. You can even rent out your second property for part of the year and still take full advantage of the mortgage interest deduction as long as you spend some time there. Follow the IRS rules.

Points – The IRS lets you deduct points in the year you paid them if, among other things, the loan is to purchase or build your main home, payment of points is an established business practice in your area, and the points were within the usual range.

Property Taxes  –  Another big part of a homeowner’s monthly payment is property tax. This is usually paid into an escrow account and paid once a year. These taxes are fully deductible for as long as you own your home.