Mortgage insurer group backs bipartisan bill preserving tax deduction

A bipartisan effort to make the mortgage insurance premium tax deduction permanent was introduced in the House of Representatives on Dec. 1, receiving support from the industry's trade group.

The bill, H.R. 6109, was sponsored by Rep. Ron Kind, D-Wis., with Rep. Vern Buchanan, R-Fla., as the co-sponsor.

"I'm proud to introduce this bipartisan legislation to make sure we stop kicking the can down the road on this important deduction," Kind said in a press release. Buchanan added, "At a time when many Americans are still struggling to recover economically, this legislation will provide much-needed relief to millions of low-and middle-income families … across the country looking to purchase a home."

Besides enshrining the deduction permanently in the Tax Code, the bill would increase the adjusted gross income cap on those eligible to take the deduction to $200,000 — $100,000 for a married individual filing a separate return — from to current $100,000 and $50,000.

Under the current law, if the borrower's income is above that amount, a 10% reduction in the deductible amount is made for every additional $1,000 of income above $100,000, or $500 for every $50,000 for a married individual filing a separate return.

Mortgage insurance payments first became deductible in 2007, and just for a one-year term. Since then, Congress has approved extensions, most recently in the Further Consolidations Appropriations Act of 2020. As the Tax Code currently stands, the deduction will no longer apply to any premiums paid or accrued after Dec. 31.

But such extensions are not necessarily automatic. In its discussions for the 2012 tax year, although it was eventually renewed, the need to raise $35 billion in revenue had Congress considering allowing the deduction to lapse.

"Making permanent the ability of homeowners to deduct 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," a statement from USMI President Lindsey Johnson said. "We are grateful to Congressmen Kind and Buchanan for their leadership on this critical legislation, and we encourage swift passage by both congressional chambers."

Back in 2017, the last year this data was available, nearly 2.3 million people took this deduction. Approximately 90% of them had gross income less than $100,000, with almost 60% under $75,000, USMI said.

Last year, over 2 million borrowers obtained a private mortgage insurance policy, with another 1.4 million using the Federal Housing Administration program and an almost equal amount using their Veterans Affairs benefit to guarantee their loan, the trade group added.

The bill was referred to the House Committee on Ways and Means, according to Congress.gov.