Who benefits from tax deduction?
If you and your spouse file a joint tax return and have adjusted gross income (AGI) of no more than $100,000 or if you file an individual tax return and have AGI of no more than $50,000, you may be able to deduct 100 percent of the PMI you paid in 2007. You’ll need to itemize your tax deductions to take advantage of this benefit. There is no cap on the amount of paid PMI that you can deduct; however, the deduction is reduced by 10 percent for each additional $1,000 of AGI. That means if you and your spouse file a joint tax return and have AGI of $100,000 to $110,000 or if you file an individual return and have AGI of $50,000 to $55,000, you may be able to take a partial deduction. The deduction is allowed for both purchase-money and refinance mortgages, but there is a gray area as to whether PMI paid for the cash-out portion of a refinance would be deductible. If you obtain a refinance loan with cash out and PMI in 2007, you’ll need to consult a tax professional for advice. Your lender
