Private Mortgage Insurance Premiums

Many programs are available for homebuyers allowing them to purchase homes they otherwise would not qualify for. One program includes putting down zero to minimal money down toward the down payment.

If you do make a down payment lower than the conventional loan requirement of 20-percent, you may be hit with paying a private mortgage insurance (PMI) premium. The word insurance should not fool you. This is not insurance to protect you as the buyer. It’s designed to protect the lender in case you were to default on the loan.

If your mortgage has even issued after 2006, the private mortgage insurance premium you paid effective 2011 may be eligible for deduction. There are stipulations to this write off. As your income increases above $50,000, this write-off will phase out.

Homeowners just starting out with itemizing deductions for the first time can get a bit overwhelmed. One mistake commonly made is overestimating the taxes you’ll save.

As an example:

Your interest and mortgage payments are $1,500 a month, and your property taxes are $3,000 for the year. That is a combined total of $21,000 a year. For someone in a 25-percent tax bracket, you probably think you’ll save $5,250 a year. This is not always the case.

You should still keep in mind that you are giving up the standard deduction. For 2016, that deduction is worth $12,600 for married couples. Anything exceeding the $12,600 will be eligible for the homeowner tax benefits. That will include homeowner write-offs and charitable contributions.