The American Bankers Association today joined a coalition of business and advocacy groups in urging lawmakers to restore a now-defunct federal tax deduction for mortgage insurance premiums. Signatories include U.S. Mortgage Insurers and the NAACP.
In a joint letter, the groups urged lawmakers to support the bipartisan Middle Class Mortgage Insurance Premium Act, which would restore and permanently extend the mortgage insurance tax deduction that was available to eligible taxpayers from 2007 to 2021. The legislation also would expand the deduction to more taxpayers by increasing the income limit from $100,000 to $200,000 per family, according to the bill’s Senate sponsors. [The legislation was also introduced in the House.]
Affordability remains a persistent barrier to homeownership across the country due to high home prices, elevated interest rates, strong home price appreciation and limited housing supply, the groups said in their letter. “Industry research and polling underscores that Americans feel it has gotten harder to buy a home over the past few years and the largest barrier is consistently identified as saving for a down payment,” they said.
“Congressional tax writers have historically viewed this deduction as a tax policy tool to level the playing field for LMI [low- and moderate-income] homebuyers — including working families — since a larger share of the mortgage interest deduction is claimed by higher wealth and income households who had the resources for large down payments,” the groups said.
“During the time that mortgage insurance premiums were tax deductible, millions of LMI homeowners benefited from this provision of the tax code and it was claimed 44.5 million times for $64.7 billion in aggregate deductions,” they added. “Based on data from the Internal Revenue Service, nearly 1.3 million households benefited from the mortgage insurance deduction for tax year 2021 for an average deduction of nearly $2,300 — a significant tax savings for hardworking families across the country.”
