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"Making permanent the ability of homeowners to deduct mortgage insurance (MI) premiums from federal income taxes and doing so in a way that makes this important tax deduction available to more hard-working middle class families, is smart public policy that benefits potentially millions of existing homeowners. Affordability remains a persistent barrier to homeownership across the country, particularly for first-time homebuyers. MI helps to sustainably bridge the down payment gap by helping families secure financing when they are unable to put 20 percent down. Low down payment mortgages, including conventional loans with private MI, have proven critical for millions of low- and moderate-income, first-time, and minority borrowers to buy a home sooner, secure financial stability, and build intergenerational wealth.
"Since 2007, the ability to deduct the cost of MI premiums has helped to put extra dollars back into the hands of millions of families each year and we strongly support legislation to make the tax deduction permanent. We are grateful to Congressmen Kind and Buchanan for their leadership on this critical legislation, and we encourage swift passage by both congressional chambers."
The tax provision on MI premiums has always been temporary, with extensions made every couple of years. Nearly 2.3 million Americans claimed the deduction in 2017 (the latest data available) with almost 60 percent of those taxpayers having less than
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To: The Honorable
The undersigned organizations are writing in regard to the current tax treatment of mortgage insurance premiums. Our organizations represent a diverse coalition of stakeholders in the housing finance system, including lenders, real estate professionals, homebuilders, and mortgage insurers, and we appreciate the opportunity to provide our collective perspective on this important tax provision. As explained further below, to better support existing homeowners and prospective homebuyers, we urge you to modify current law to make the mortgage insurance premium tax deduction permanent and to eliminate its income phaseout.
Affordability remains a persistent barrier to homeownership across the country and mortgage insurance helps bridge the down payment gap for borrowers who lack the resources for a 20 percent down payment or have less than perfect credit. Low down payment mortgages - including conventional mortgages with private mortgage insurance and loans with government mortgage insurance and loan guarantees through the
Since 2007, the tax code has treated mortgage insurance premiums as qualified residential mortgage interest and they have been tax deductible, subject to an income phaseout for taxpayers with adjusted gross incomes (AGI) over
However, two key aspects of the current mortgage insurance premium deduction hamper its effectiveness: (1) its temporary nature; and (2) its relatively low AGI phaseout. Further, the mortgage insurance premium deduction is the only itemized deduction subject to an AGI cap and/or phaseout. As you know, the Tax Cuts and Jobs Act of 2017 (TCJA)/6 modified numerous aspects of the tax code and doubled the standard deduction. While millions of households still claim this deduction, no doubt this change, in concert with the current AGI phaseout, has significantly reduced the number of homeowners who benefit from the deduction. Prior to the enactment of the TCJA, more than 4 million taxpayers claimed the deduction each year and estimates indicate that about 2.4 million taxpayers claim the deduction each year post-TCJA implementation./7 The current AGI phaseout represents a burdensome eligibility criterion for American families to claim the mortgage insurance deduction and millions more homeowners would benefit from a permanent extension that eliminates the AGI phaseout.
Thank you for your consideration of our recommendation that the mortgage insurance premium tax deduction be made permanent and that the AGI phaseout be eliminated. We welcome the opportunity to further engage on this important issue to support access to affordable mortgage financing for American families.
Very truly yours,
1/ GSE aggregate data, HUD quarterly reports to
2/ Enact MI First-Time Homebuyer Market Reports.
4/ Pub. L. 116-94 (
5/ For example, for tax year 2017 there were 2,285,440 returns that claimed the mortgage insurance premium deduction for a total amount of
6/ Pub. L. 115-97 (
7/ Analysis of
The letter can be viewed at: https://www.usmi.org/usmi-letter-to-jct-04-16-2021-2/