New tax break for middle-income tax payers purchasing a home in 2007

This week congress approved a new tax break for middle- income taxpayers that plan to purchase a home in 2007! The tax break will let homebuyers deduct mortgage insurance premiums on their tax returns. Most homebuyers who put less than 20% down on a home loan have to pay mortgage insurance, which is designed to protect lenders from default. The cost is typically 1/2 of 1% of the home mortgage, or $75 a month on an $180,000 loan. MI companies estimate that 20% of homebuyers have mortgage insurance either through private insurers or the federal government. It is estimated that the deduction will save homeowners $300 to $500 a year on taxes.

The full deduction is limited to homeowners with adjusted gross income of $100,000 or less. If you are already paying insurance premiums on an existing mortgage, this tax break does not apply. The deduction is available for new mortgages issues after December 31st.