[Summary of H.R. 1336: to provide a tax deduction]{.underline}

**[for mortgage insurance premiums]{.underline}**

# Present Law

An individual is allowed to claim an itemized deduction for the amount
of qualified residence interest paid or accrued during the year. For
this purpose, qualified residence interest means any interest paid or
accrued during the taxable year on any acquisition indebtedness or any
home equity indebtedness with respect to any qualified residence of the
taxpayer. Acquisition indebtedness means any indebtedness which is
incurred in acquiring, constructing, or substantially improving any
qualified residence of the taxpayer and is secured by such residence (or
any refinancing of such indebtedness). The aggregate amount treated as
acquisition indebtedness for any period may not exceed \$1,000,000. Home
equity indebtedness means any other indebtedness secured by a qualified
residence that does not exceed the fair market value of the residence
(reduced by the amount of acquisition indebtedness with respect to such
residence). The aggregate amount treated as home equity indebtedness for
any period may not exceed \$100,000. Prepaid interest ("points") paid by
an individual with respect to acquisition indebtedness (but not to a
refinancing) generally is deductible in the year paid.

Any person who in the course of a trade or business, receives during any
calendar year \$600 or more of interest from any individual, must report
such receipts to the Internal Revenue Service and furnish the individual
with a copy of such statement.

**[Description of Proposal]{.underline}**

An individual would be allowed to claim an itemized deduction for the
amount of qualified mortgage insurance premiums paid or accrued during
the year. For this purpose, qualified mortgage insurance premiums would
mean amounts paid for private mortgage insurance (PMI), Federal Housing
Administration (FHA) mortgage insurance, Veteran Affairs (VA) mortgage
insurance, and Guaranteed Rural Housing (GRH) mortgage insurance with
respect to acquisition indebtedness (or any refinancing of such
indebtedness). The deduction would not be allowed with respect to any
mortgage insurance paid with respect to home equity indebtedness. The
deduction would be allowed for purposes of the alternative minimum tax.

PMI and FHA programs generally require monthly or annual periodic
insurance premium payments. The FHA program also has an up-front fee.
The VA and GRH programs have only up-front fees. With respect to PMI,
the deduction would be allowed for the periodic mortgage insurance
premiums made during the taxable year. If an individual makes an
up-front payment of his or her PMI premiums, such amount would be
amortized and deducted over the term of the mortgage. With respect to
FHA insurance, the deduction would be allowed for the periodic mortgage
insurance premiums made during the taxable year and the amortized
portion (over the term of the mortgage) of any up-front fee paid at the
origination of the mortgage. At the time a mortgage is repaid (either
through refinancing or through repayment of the balance) any unamortized
portion of the up-front PMI or FHA payment would not be deductible. With
respect to VA and GRH insurance, the deduction would be allowed for the
up-front fee paid at the origination of the mortgage in the year such
fee is paid or accrued.

The deduction would be allowed in full if the taxpayer has adjusted
gross income (AGI) of \$100,000 (\$50,000 in the case of a taxpayer
filing married separately) or less during the taxable year the deduction
is to be claimed. The deduction would be phased-out, in 10 percentage
point increments for each \$1,000 or fraction thereof (\$500 or fraction
there of in the case of a taxpayer filing married separately) that the
taxpayer's AGI exceeds \$100,000 (\$50,000 in the case of a taxpayer
filing married separately).

The Secretary of the Treasury would be authorized to issue regulations
that would require persons who receive qualified mortgage insurance
premiums to make a return reporting the amount of such receipts to the
Internal Revenue Service and the person making such payments. It is
intended that such reporting be done by the person who receives the
premiums from the homeowner (i.e., generally, the lender or person
servicing the mortgage). The return shall be in such form, be due, and
set forth such information as the Secretary may require. Reporting shall
not be required until such regulations are finalized.

**[Effective Date]{.underline}**

The proposal shall be effective with respect to qualified mortgage
insurance premiums paid or accrued after the date of enactment.