Mortgage Insurance Premium Deduction Retroactively Extended
On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, including retroactively extending certain tax provisions that expired after 2017 or were about to expire, a number of retirement and IRA plan modifications, and other changes that will impact a large portion of U.S. taxpayers as a whole. This article is one of a series of articles dealing with those changes and how they may affect you.
For tax years 2007 through 2017, when taxpayers itemized deductions, they could deduct the cost of premiums for mortgage insurance on a qualified personal residence as home mortgage interest.
This deduction has been retroactively extended back to 2018 and through 2020. If you paid premiums for mortgage insurance in 2018 or were amortizing prepaid mortgage insurance premiums from an earlier year’s home purchase, you may be able to amend your 2018 return for a tax refund.
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There are many reasons to convert a home into a rental, such as to ensure that a prior home produces income and appreciation after the owner buys a new home; to maximize the tax benefits for an elderly person who can no longer live alone by delaying the sale of that person’s home; and to ensure that a home provides value when its owner takes a temporary job assignment in a different location. Some homeowners even mistakenly think that, when a home has declined in value, converting it into a rental can allow them to deduct that loss. Regardless of why an individual makes such a conversion, a number of tax issues come into play as a result of that decision.
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If you sold your home this year, or if you are thinking about selling it, you should be aware of the many tax-related issues that could apply to that sale so that you will be prepared at tax time and not have to deal with unpleasant surprises. This article covers home sales and the home-sale gain exclusion, particularly when that gain exclusion applies and what portion of it applies. Certain special issues always affect home sales, such as the use of a portion of the home as an office or daycare center, previously use of the property as a rental, and acquisition in a tax-deferred exchange. Other frequently encountered issues are related to the “2 years out of 5” rules for ownership and use, as these rules must be followed to qualify for gain exclusion.
Many retirees have insufficient financial resources to keep up with inflation and the ever-increasing costs of medical care. What options do these seniors have, especially if they have a mortgage on their home and their retirement income is too low to cover their mortgage payments with enough left over for some enjoyment in their golden years, without relying on help from family?
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