Orlando Harmon
The tax deductibility of private mortgage insurance (PMI) premiums has been inconsistent over the years, with homeowners unable to claim it in 2024. The deduction was previously available for mortgages originating after 2006, but it was reduced once the Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately) and eliminated above $109,000 ($54,500 married filing separately). While the deduction expired in 2021, a new bill called the Mortgage Insurance Tax Deduction Act of 2025 aims to reinstate it.
| Characteristics | Values |
|---|---|
| Tax deductibility for mortgage insurance premiums | Comes and goes according to the decisions made by Congress |
| Mortgage insurance premium deduction | Reduced by 10% for every $1,000 above the adjusted gross income (AGI) threshold |
| AGI threshold for single taxpayers | $100,000 |
| AGI threshold for married taxpayers filing separately | $50,000 |
| PMI policy mortgage origination year | After 2006 |
| Maximum AGI for tax deduction | $109,000 for single taxpayers; $54,500 for married taxpayers filing separately |
| Tax years for which MIP and PMI tax deductions were allowed | 2018, 2019, 2020, 2021 |
| Type of loan requiring mortgage insurance | Federal Housing Administration (FHA) loans, U.S. Department of Agriculture (USDA) loans, and conventional loans |
| Down payment percentage triggering the need for mortgage insurance | Less than 20% |
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What You'll Learn
Income limits for tax deductions
When it comes to income limits for tax deductions, there are a few things to consider. Firstly, it's important to understand the difference between itemized and standard deductions. Standard deductions are a set amount based on your filing status, such as single or married, and they are usually the simpler option. On the other hand, itemized deductions are qualified expenses that you can deduct from your taxable income. These may include medical and dental expenses, insurance premiums, and certain interest payments.
In the context of mortgage insurance premiums, there have been limitations in the past. For example, for MI premiums paid through 2021, the deduction was reduced once the Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately), and it was completely eliminated with an AGI above $109,000 ($54,500 married filing separately). However, the availability of deductions for PMI costs can vary depending on decisions made by Congress. Therefore, it is important to refer to the relevant tax laws for the specific year in question.
Additionally, income limits for tax deductions can also apply to retirement savings plans, such as Individual Retirement Arrangements (IRAs). For traditional IRAs, contributions are generally tax-deductible up to a certain limit, which was $6,000 for tax year 2022 for most taxpayers and $7,000 for those age 50 or older. However, if you or your spouse has an employer-sponsored retirement plan, your deduction may be limited or phased out completely above certain income levels. For example, in 2023, the IRA deduction was phased out for single taxpayers with a modified AGI between $73,000 and $83,000.
It is worth noting that different types of IRAs, such as Roth IRAs, are treated differently for tax purposes. Withdrawals from Roth accounts are typically tax-free in retirement because taxes are paid on contributions rather than withdrawals. In contrast, traditional IRA distributions are taxed when they are withdrawn. It is important to review the specific rules and income limits that apply to each type of retirement account.
Lastly, it is important to consider other factors that may impact your eligibility for certain tax deductions. For example, if you receive mortgage assistance payments under the Homeowner Assistance Fund program (HAF), these payments are not considered income, and you cannot take a deduction or credit for them. Similarly, if you qualify for mortgage assistance payments for lower-income families under Section 235 of the National Housing Act, you cannot deduct the interest that is paid for you by a government agency.
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Private mortgage insurance (PMI)
PMI is arranged by the lender and provided by private insurance companies. It protects the lender, not the borrower, against losses caused by the borrower failing to make loan payments. PMI can help borrowers qualify for a loan they might not otherwise be eligible for, but it increases the cost of the loan.
PMI can be paid in a one-time upfront premium at closing, or through a combination of upfront and monthly payments. The upfront premium is shown on the Loan Estimate and Closing Disclosure, and the monthly premium is shown in the Projected Payments section.
Lenders are required to cancel PMI when the loan balance reaches 78% of the home's original value, or once the borrower is halfway through the loan term, whichever comes first. Borrowers can also request that PMI be cancelled when the mortgage balance reaches 80% of the home's value. Alternatively, borrowers can wait for PMI to be automatically cancelled when the LTV ratio drops to 78%, or one month after passing the midpoint of the loan term.
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Mortgage Insurance Premiums (MIP) for FHA-backed loans
Mortgage Insurance Premium (MIP) is paid by homeowners as mortgage insurance for Federal Housing Administration (FHA) loans. FHA loans are "insured" by the Federal Housing Administration (FHA). FHA loans typically have more lenient standards for borrowers, such as lower credit score and down payment requirements.
MIP for an FHA loan is mandatory no matter how much you put down, and in most cases, you’ll pay it for the entire loan term. Your FHA loan MIP will involve two payments: an upfront premium and an additional annual payment. The upfront MIP is 1.75% of the loan amount, so if you borrow $200,000, you'll pay $3,500 at closing. The annual payment portion, which is between 0.15% and 0.75% of the loan amount, depends on the base loan amount, LTV ratio, and duration of the mortgage term. For example, if you take out a 30-year FHA loan to buy a property with a sale price of $340,000 and make a 3.5% down payment, your upfront MIP cost will total $5,742. In addition, you’ll pay 0.55% of the loan amount each year, spread throughout your monthly payments. This will total about $150 per month for your loan term.
FHA mortgage insurance premiums are additional fees that all FHA loan borrowers pay, upfront and over the mortgage term. Most FHA borrowers must pay them for the duration of the 30- or 15-year loan term. However, FHA MIPs don’t protect the borrower. Instead, they protect the lender against default by the borrower. Should a borrower default on the mortgage, the agency will compensate the lender for the outstanding balance.
Until the 2017 Tax Cuts and Jobs Act, mortgage insurance premiums were deductible in addition to allowable mortgage interest. The Further Consolidated Appropriations Act of 2020 allowed tax deductions for MIP and private mortgage insurance (PMI) for 2020 and retroactively for 2018 and 2019. However, the Act expired, and mortgage insurance premiums are no longer deductible.
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Deducting PMI from federal taxes
The tax deductibility of Private Mortgage Insurance (PMI) and Mortgage Insurance Premiums (MIP) has been an inconsistent affair, with the legislation evolving over the years. The Further Consolidated Appropriations Act of 2020 allowed MIP and PMI tax deductions for tax years 2018, 2019, 2020, and 2021 if qualified taxpayers filed amended federal tax returns. The deduction expired at the end of 2021 and is not available for the 2022 tax year and beyond.
The PMI policy's mortgage had to be originated after 2006, and the deduction was reduced once the Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately). The deduction was completely eliminated with an AGI above $109,000 ($54,500 married filing separately). The potential tax savings from deducting mortgage insurance premiums depend on your tax bracket and how much you pay toward PMI over the course of a year. For example, a taxpayer earning $100,000 and filing jointly, putting them in the 22% bracket for 2021, would save $880 on their federal income tax return by deducting a $4,000 PMI payment.
The tax deduction for PMI premiums (or Mortgage Insurance Premiums (MIP) for FHA-backed loans) is not a permanent part of the tax code. Instead, it has generally been authorized by Congress as part of other bills and extended to cover the most recent tax year. While the deduction was not renewed by Congress for the 2022 tax year, it may be reinstated for future years.
Homeowners who took out or refinanced a mortgage before 2021 may have qualified for the PMI tax deduction depending on their income. To deduct PMI from federal taxes, eligible taxpayers needed to meet the criteria for the applicable tax years (2018-2021) and file an amended tax return. The insurance must have been paid during those years.
To claim the PMI deduction, you need to itemize deductions rather than taking the standard deduction on your federal tax return. The mortgage must have been used to buy or improve your primary home or second home. Additionally, income phaseouts apply, with eligibility for the PMI deduction reduced for higher earners.
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Cancelling PMI
Private Mortgage Insurance (PMI) is an additional cost added to your mortgage payments. It is typically required when a buyer purchases a home with a down payment of less than 20%. This insurance protects the lender if the borrower defaults on the loan. However, there are ways to cancel PMI and avoid paying this extra cost.
Firstly, it's important to note that your lender or servicer must automatically cancel your PMI when your mortgage's loan-to-value (LTV) ratio reaches 78% of your home's purchase price, or the month after you reach the midpoint of your loan's term, according to the Homeowners Protection Act of 1998. This midpoint is usually after 15 years for a 30-year loan.
If you don't want to wait for automatic cancellation, you can request an early cancellation of PMI when your mortgage balance reaches 80% of your home's purchase price. To do this, ensure that your payments are current and in good standing, and submit a written request to your lender or servicer. You may also need to provide evidence, such as an appraisal, that the value of your property has not declined below its original value.
Another way to get rid of PMI is to refinance your mortgage. With rising home values, you may have built up enough equity to refinance and avoid paying PMI. You can also consider refinancing to a conventional loan if you currently have an FHA loan, as this may eliminate your Mortgage Insurance Premium (MIP).
Finally, you can speed up the process of reaching the PMI cancellation threshold by paying extra towards your principal. This can be done by making biweekly payments, an additional payment each year, or a lump sum at any time. Check with your lender to ensure that these extra payments go towards the loan's principal.
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Frequently asked questions
The income limit for mortgage insurance premium tax deductions was an adjusted gross income (AGI) of $100,000 for individuals and $50,000 for married couples filing separately. The deduction was reduced by 10% for every $1,000 above this threshold and was eliminated for an AGI above $109,000 for individuals and $54,500 for married couples filing separately.
The mortgage insurance premium tax deduction allowed homeowners to deduct the premiums they paid for private mortgage insurance (PMI) or mortgage insurance premiums (MIP) on their federal income taxes.
No, the mortgage insurance premium tax deduction is not currently available. The deduction expired at the end of 2021 and has not been extended by Congress. However, there have been efforts to reinstate it, such as the Mortgage Insurance Tax Deduction Act of 2025 introduced in February 2025.
