The folks at the Motley Fool are reporting on a new addition to the tax laws: the ability to tack on your Private Mortgage Insurance (PMI) payments to your itemized deduction in 2007 like you do your mortgage interest payments.
I really like this little snippet:
Unlike your mortgage, which you’ll probably pay for decades, private mortgage insurance can come to a relatively quick end.
And of course, that is true, depending on how you define relatively. On a, for instance, age of the universe scale, 11 years is relatively quickly. To me, 11 years of PMI for a one year deduction just doesn’t seem like that wonderful of a deal. Wait, what was that? You didn’t notice that the law, as currently written, allows this deduction for a single year? Hmmm, yeah, I can see how you might have missed that, as it they certainly didn’t spend much time on that particular fact.
Even for 2007 — when this provision will actually be in effect — I just don’t see how paying $4 to the mortgage company to save an additional $1 on my taxes is anything but, well, stupidity. (I’ve seen a couple posts by people who seems excited by the proposition, but I can’t seem to find the posts in my history or I’d trackback ‘em just to see if I could get a decent justification on how this is a particularly good idea.)
While it may be a slight help to the potential homeowner, the private mortgage insurers are the true winners with this. It will just make it more likely that those with a weak grasp of the big picture – “Hey, we get to write off that PMI thing! Let’s go get that house we can’t afford!” – are that much more likely to justify to themselves taking out that zero-down-payment loan.
Oh, and to top it all off, I get to answer excited question about this for the next 4 months…
Yeah, me! 
[tags]PMI,private mortgage insurance,mortgage,taxes,itemized deductions[/tags]
