Is Mortgage Insurance Tax Deductible? Not For Long!

Is mortgage insurance tax deductible?  Yes.  For now.  But not for long. In their infinite wisdom (yes, I’m being sarcastic) Congress saw fit to enact the Mortgage Forgiveness Debt Relief Act of 2007 which, among other things, made Private Mortgage Insurance premiums tax-deductible for the tax year 2007.

I suppose Congress felt consumers still wanted desperately to buy a new home, if only that pesky PMI were tax-deductible (nevermind the mortgage interest tax deduction)!  At least, that’s the only thing I can think of that could have been going through their heads when they dreamed up a few of the rather ridiculous conditions.

Private Mortgage Insurance Is Tax Deductible If And Only If…

1. You bought after January 1, 2007 – Did you close on December 31st?  No tax deduction for you!
2. It’s only valid on your first and second home – Did you buy one home you couldn’t afford with little or no down-payment?  That’s cool.  You get the tax deduction.  Did you buy two homes you couldn’t afford with little or no down-payment?  Still fine by use.  Three houses?  Four houses?  No tax deduction for you! Apparently it’s okay to be a little irresponsible with money but if you buy too many houses Uncle Sam will smack you down.
3. You have an IQ below 50 (or are on crack) – Because seriously, you wouldn’t have needed private mortgage insurance to begin with unless you were completely retarded.  Or on crack.  They are not mutually exclusive.

Why “Is Mortgage Insurance Tax Deductible?” Is A Ridiculous Question

Mortgage insurance hasn’t historically been tax-deductible because a.) it’s only required when you put down less than 20% of the value of a house as down-payment (which rarely happened until recently) and b.) it’s quite obviously a personal expenditure for services rendered, not a cost own owning a home.  The mortgage lender is doing you a favor by agreeing to lend you the money assuming you take out private mortgage insurance.  Reducing the cost of private mortgage insurance only serves to encourage more consumers to over-spend on housing which, judging from recent events, is the absolute dumbest thing our government could possibly do. But nobody ever said our government was smart…