Orlando Harmon
Private mortgage insurance (PMI) is often required for homebuyers who put down less than 20% on their homes. The tax deductibility of PMI premiums has been inconsistent over the years, with the most recent change occurring in 2021, when the provision expired. Homeowners who refinanced or took out a mortgage before 2021 may still be eligible for the PMI tax deduction, depending on their income. The PMI deduction is not available for the 2024 tax year, but there are efforts to reinstate it for 2025.
| Characteristics | Values |
|---|---|
| Mortgage insurance tax deduction available for tax year | 2018, 2019, 2020, 2021 |
| Tax deduction expired at the end of | 2021 |
| Tax deduction available for | Homeowners who took out or refinanced a mortgage before 2021 |
| Tax deduction not available for | Tax year 2024 |
| Tax deduction allowed only if the mortgage on which PMI was paid | Taken out on or after Jan 1, 2007 |
| Tax deduction for PMI premiums | Also called Mortgage Insurance Premiums (MIP) for FHA-backed loans |
| PMI can be canceled when | You have 20% equity in your home |
| PMI deduction | Not available for tax year 2024 |
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What You'll Learn
Private mortgage insurance (PMI) tax deductions
Private mortgage insurance (PMI) is usually required for homebuyers who put down less than 20% of the home's purchase price. PMI protects the lender if the borrower defaults on the loan.
The Tax Relief and Health Care Act of 2006 introduced the deduction for mortgage insurance premiums. The deduction was extended several times, covering the years 2015, 2017, and 2018-2021. However, the provision expired at the end of 2021, and Congress did not extend it further. Therefore, PMI is not deductible for the 2022 tax year and beyond.
Homeowners who qualify for the PMI tax deduction in the applicable tax years (2018-2021) can deduct PMI from their federal taxes by filing an amended tax return. The deduction can be claimed on line 8d of Schedule A (Form 1040) for amounts paid or accrued. It's important to note that the deduction may be reduced or eliminated based on the taxpayer's Adjusted Gross Income (AGI). For example, in 2021, the deduction was not allowed for taxpayers with an AGI over $109,000 or $54,500 for married couples filing separately.
While the PMI deduction is no longer available, homeowners can explore other tax deductions, such as the mortgage interest paid yearly and state and local real estate taxes. Additionally, homeowners can focus on eliminating PMI by paying down their mortgage and requesting PMI cancellation once they have reached 20% equity in their home.
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Mortgage Insurance Premium (MIP) for FHA-backed loans
An FHA loan is a type of mortgage that is backed by the Federal Housing Administration (FHA). Compared to other mortgage options, FHA loans typically have more lenient standards for borrowers, such as lower credit score and down payment requirements. However, one of the drawbacks of FHA loans is that they require borrowers to pay a mortgage insurance premium (MIP). This is an additional payment made to secure the mortgage loan.
The FHA MIP includes two payments: an upfront premium and an additional annual payment. The upfront premium is typically paid at closing and totals 1.75% of the loan amount. Borrowers can choose to pay this premium all at once or add it to their mortgage and pay it over time. If the latter option is chosen, interest will accrue on the cost, increasing the overall expense. The annual premiums are based on the loan amount, loan term, and loan-to-value (LTV) ratio, or the size of the down payment. Borrowers will pay this premium in installments along with their monthly mortgage payments.
The purpose of the FHA MIP is to protect lenders against the risk of borrower default. While MIP does not provide any direct benefit to the borrower, it enables lenders to offer FHA loans with more lenient requirements. Without MIP, lenders would likely require a much larger down payment for borrowers to qualify for a mortgage.
In the past, borrowers could deduct their MIP payments from their federal taxes for certain tax years. The Further Consolidated Appropriations Act of 2020 allowed MIP tax deductions for tax years 2018 through 2021 if qualified taxpayers filed amended federal tax returns. However, this deduction expired at the end of 2021, and MIP is no longer tax-deductible for tax year 2022 and beyond.
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Home mortgage interest deductions
If you are a homeowner, you are likely eligible for a mortgage interest deduction. The IRS allows you to claim a deduction for the mortgage interest you paid during the previous tax year. This deduction can apply to various types of residences.
You can usually deduct the interest you pay on a mortgage for your main home or a second home, but there are some restrictions. For example, you can't deduct interest on a mortgage for a third or fourth home. Additionally, the home must be a secured debt on your home, otherwise, it is considered a personal loan, and the interest you pay is usually not deductible.
For tax years prior to 2018, the maximum amount of debt eligible for the deduction was $1 million. Beginning in 2018, the maximum amount of debt is limited to $750,000. Mortgages that existed as of December 15, 2017, will continue to receive the same tax treatment as under the old rules.
You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million or $500,000 if married filing separately) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.
You can deduct your PMI or MIP from your federal taxes if you meet the eligibility criteria for the applicable tax years, 2018 through 2021, and you're able to file an amended tax return. The deduction wasn't allowed for taxpayers with an AGI over $109,000 or $54,500 for married couples filing separately in 2021. The mortgage insurance premium deduction expired at the end of 2021 and is not available for tax years beyond this date.
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Itemizing mortgage-related deductions
The itemized deduction for mortgage insurance premiums has expired, so you can no longer claim it. However, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. If you are deducting mortgage interest from indebtedness incurred before December 16, 2017, the limit is higher at $1 million ($500,000 if married filing separately).
To itemize mortgage-related deductions, you need to keep track of what you spent during the year on deductible expenses. This includes out-of-pocket medical expenses, charitable donations, mortgage interest, real estate taxes, and state income taxes. You also need to maintain supporting documentation, such as receipts, bank statements, medical bills, acknowledgment letters from charitable organizations, and tax documents reporting the mortgage interest, real estate taxes, and state income taxes paid during the year.
In January, your mortgage lender should provide you with Form 1098 (Mortgage Interest Statement). This form may arrive in the mail, be attached to your December or January mortgage bill, or be available to download online. Form 1098 shows the amount of mortgage interest you paid during the previous year and may also include any points, mortgage insurance premiums, and real estate taxes you paid through your mortgage servicer.
You can deduct as home mortgage interest any late payment charges if they weren't for a specific service performed in connection with your mortgage loan. If you pay off your home mortgage early and incur a prepayment penalty, you can deduct that penalty as home mortgage interest provided it isn't for a specific service performed or cost incurred in connection with your mortgage loan.
If you sell your home, you can deduct your home mortgage interest (subject to any applicable limits) paid up to, but not including, the date of the sale.
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Amended tax returns
Private mortgage insurance (PMI) and mortgage insurance premiums (MIP) are often required for homebuyers who put down less than 20% of the purchase price of their homes. These insurance premiums were not deductible from federal taxes for years, but the legislation surrounding this has evolved.
The Further Consolidated Appropriations Act of 2020 allowed eligible taxpayers to deduct MIP and PMI from their federal taxes for tax years 2018 through 2021. This deduction could be claimed on line 8d of Schedule A (Form 1040) for amounts paid or accrued. However, this deduction expired at the end of 2021 and is not available for tax year 2022 and beyond.
If you were eligible for the PMI tax deduction but didn't take it, you might be able to file an amended tax return to claim it retroactively. This option is available for tax years 2018 to 2021. It's important to note that the deadline to file amended returns for these tax years may vary, and there may be specific requirements or restrictions that apply.
In 2025, a new bill called the Mortgage Insurance Tax Deduction Act of 2025 was introduced to bring back the PMI tax deduction. As of April 2025, this bill is still pending approval.
While the PMI deduction is not available for tax years after 2021, homeowners may be able to leverage other tax deductions to their benefit. It's always a good idea to consult with a tax professional or the IRS directly to understand your specific situation and explore all available options.
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Frequently asked questions
Private mortgage insurance (PMI) has been tax-deductible off and on for homeowners in recent decades. The last time PMI or MIP premiums were deductible was for the 2021 tax year.
The tax deduction for PMI premiums (or Mortgage Insurance Premiums (MIP) for FHA-backed loans) is not part of the tax code. It has generally been authorized by Congress as parts of other bills. The deduction was available for eligible taxpayers who filed amended federal tax returns. Filers used the deduction on line 8d of Schedule A (Form 1040) for amounts paid or accrued.
The PMI policy's mortgage had to be originated after 2006. The deduction was reduced once the Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately) and completely eliminated with an AGI above $109,000 ($54,500 married filing separately).
No, the mortgage insurance premium tax deduction expired at the end of 2021. It is not available for 2022 and beyond.
Yes, in February 2025, a new bill called the Mortgage Insurance Tax Deduction Act of 2025 was introduced to bring this tax deduction back. It must pass the House of Representatives and the Senate and be approved by the President to become law.
