Not specifically related to the sweeping Tax Cuts and Jobs Act (TCJA) that took effect for the 2018 tax year, the Schedule A deduction for mortgage insurance premiums (MIP.PMI) expired at the end of 2017. However, in the evening of December 20, 2019 President Trump signed the Further Consolidated Appropriations Act, bringing the deduction back. The TCJA Act kept the government running past December 20, 2019. The bill also included a series of tax provisions in separate sections. One of which included “Extenders” for tax provisions that had expired at the end of 2017 granting an additional temporary extension of time before they are again scheduled to expire.
The deduction, while resurrected on December 20, 2019, is retroactive to the beginning of 2018 for the 2018 tax year. Which means that taxpayers will need to amend their 2018 tax return to take advantage of the deduction assuming it applies to them individually. Taxpayers who had their returns professionally prepared, will need to have discussion with their tax preparer about the cost of filing a refund claim for this deduction vs. the expected tax benefit. Also, the IRS may need to change forms in order for this to even be amended, since it is not on the 2018 1040.
To be deductible, you had to have paid mortgage insurance under an insurance contract issued on or after January 1, 2007. Either as mortgage insurance premium (MIP) provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Services, or as private mortgage insurance (PMI). Keep in mind that income caps and ability to itemize your deductions may limit or eliminate your tax benefit. Always check with your CPA.
The deduction is now set to expire at the end of 2020. If it is extended again for 2021, hopefully the extension comes before taxpayers file for that year.
For more information on extenders and other tax questions, please consult your tax advisor.
Dale Jensen, CPA