On December 20, 2006, President George W. Bush signed into law new tax legislation that provides for the itemized deduction on federal tax returns of the cost of mortgage insurance paid by eligible borrowers for the 2007 tax year. In the past, borrowers could not deduct the cost of mortgage insurance for tax purposes. The legislation affects borrowers with mortgage insurance contracts issued between January 1 and December 31, 2007. These MI premiums paid during 2007 may qualify for tax deductibility on borrowers' 2007 federal tax returns as follows:
- Borrowers with adjusted gross incomes of $100,000 or less may deduct 100 percent of their MI premiums.
- For adjusted gross incomes above $100,000, MI deductions are phased out at 10 percent increments, for every $1,000 (or $500 for a married individual filing a separate return) or fraction thereof of income above.
- $100,000 (or $50,000 for a married individual filing a separate return).