Orlando Harmon
The deductibility of Private Mortgage Insurance (PMI) premiums has been inconsistent for years, but it was not deductible in the tax year 2024. The tax deduction for PMI premiums is not part of the tax code, but it is generally authorized by Congress as part of other bills. The last time PMI premiums were deductible was for the tax year 2021, but this may change in the future. The IRS code covering the deductibility of mortgage interest, which currently does not include PMI premiums, can be found in Publication 936.
| Characteristics | Values |
|---|---|
| What is Mortgage Insurance Premium (MIP) or Private Mortgage Insurance (PMI) | Insurance that protects the lender in the event that the borrower defaults and the lender forecloses on the property. |
| Who pays for MIP/PMI | The premium for PMI is paid by the borrower. |
| When is MIP/PMI required | When the down payment is less than 20% of the purchase price of the home. |
| Can MIP/PMI be cancelled | Yes, once certain conditions are met. The borrower should be notified on an annual basis that it is possible to cancel PMI. |
| How to find out if you paid MIP/PMI | You will receive a Form 1098, Mortgage Interest Statement, that will report the amount of your qualified premiums. |
| How to report MIP/PMI on taxes | The itemized deduction for mortgage insurance premiums has expired and cannot be claimed. |
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What You'll Learn
- The itemized deduction for mortgage insurance premiums expired in 2022
- You can deduct home mortgage interest on up to $750,000 of indebtedness
- You should receive Form 1098 from your lender, which shows the interest amount
- You can claim the PMI deduction for eligible years if claiming itemized deductions
- The tax deduction for PMI premiums is not part of the tax code
The itemized deduction for mortgage insurance premiums expired in 2022
The itemized deduction for mortgage insurance premiums, including private mortgage insurance (PMI) and mortgage insurance premiums (MIP), expired in 2022. This means that homeowners can no longer claim a deduction for PMI premiums on their federal income taxes.
Private mortgage insurance is often required for homebuyers who put down less than 20% on their homes. It protects the lender if the borrower defaults on the loan. Typically, PMI can be canceled when the homeowner has reached 20% equity in their home.
The Tax Relief and Health Care Act of 2006 initially introduced the deduction for mortgage insurance premiums. Since then, Congress has made several moves to extend or reinstate this deduction. For example, in 2019, Congress reintroduced a federal tax deduction that allowed homeowners paying PMI to write off the premiums for the tax years 2018, 2019, 2020, and 2021, as long as they itemized their tax deductions.
The deduction was extended for 2020 and 2021 by the Further Consolidated Appropriations Act of 2020, and it was made retroactive to 2018 and 2019 if taxpayers filed amended returns. However, the deduction was not extended beyond 2021, and it expired at the end of that year.
Homeowners can no longer claim a deduction for PMI premiums on their taxes, and they must explore other tax deductions, such as the mortgage interest deduction and state and local real estate tax deductions, to reduce their tax liability.
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You can deduct home mortgage interest on up to $750,000 of indebtedness
If you make payments to a financial institution or a money-lending business, you should receive Form 1098 or a similar statement from the lender. This form will show the amount of interest to be entered on line 13. You can deduct home mortgage interest on up to $750,000 of indebtedness. This means that you can deduct the mortgage interest you paid during the tax year on the first $750,000 of your mortgage debt for your primary home or a second home. If you are married filing separately, the limit drops to $375,000.
If you bought the house before December 16, 2017, you can deduct the interest you paid during the year on the first $1 million of the mortgage ($500,000 if married filing separately). There is an exception to this December 15, 2017, cutoff: if you entered into a written binding contract before that date to close before January 1, 2018, and closed on the house before April 1, 2018, the IRS considers your mortgage to be obtained prior to December 16, 2017.
Mortgages you (or your spouse, if married and filing a joint return) took out after October 13, 1987, and before December 16, 2017, to buy, build, or substantially improve your home (called home acquisition debt) are eligible, but only if these mortgages plus any grandfathered debt totalled $1 million or less ($500,000 or less if married filing separately) throughout 2024.
Mortgages you (or your spouse, if married and filing a joint return) took out after December 15, 2017, to buy, build, or substantially improve your home (called home acquisition debt) are eligible, but only if these mortgages plus any grandfathered debt totalled $750,000 or less ($375,000 or less if married filing separately) throughout 2024.
The itemized deduction for mortgage insurance premiums has expired. You can no longer claim the deduction.
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You should receive Form 1098 from your lender, which shows the interest amount
If you make payments to a financial institution or a lender, you should receive Form 1098 from your lender. This form will show the amount of interest to enter on line 13. You should include on this line any other interest payments made on debts secured by a qualified home for which you didn't receive a Form 1098. Do not include points or mortgage insurance premiums on this line.
Form 1098 is a tax document that homeowners will receive if they pay $600 or more in mortgage interest over the course of a year. It is a tax form that details the amount of interest, insurance premiums, and points that a borrower pays on a mortgage. Lenders send Form 1098 to mortgage borrowers and to the IRS. If you receive a Form 1098, you can use it to potentially deduct the mortgage interest that you paid when you file your yearly taxes.
The amount of mortgage interest you paid will be found in Box 1 on Form 1098. You will prepare to file Form 1040 or Form 1040-SR. All itemized deductions, including your mortgage interest, will be reported on Schedule A. Your mortgage interest will go on line 8a. Mortgage points are a fee you pay your lender to lower your interest rate. You may be able to deduct mortgage points, which will also be listed on Form 1098.
Mortgage Insurance Premium (PMI) deduction expired in 2022. In most cases, you will receive a Form 1098, Mortgage Interest Statement, that will report the amount of your qualified premiums in Box 4. If you did pay qualifying mortgage insurance premiums and the deductible amount is not included in Box 4 of your Form 1098, you would need to contact the mortgage insurance issuer to determine the amount of your deduction.
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You can claim the PMI deduction for eligible years if claiming itemized deductions
The itemized deduction for mortgage insurance premiums was available for eligible years, but it has since expired. This means that you can no longer claim the deduction for tax year 2022 and beyond.
For eligible years, you could claim the Private Mortgage Insurance (PMI) deduction if you were claiming itemized deductions and met the following criteria:
- The mortgage is secured by your first or second home.
- You pay mortgage insurance premiums for your mortgage.
- You file Form 1040 or 1040-SR.
- You itemize deductions on Schedule A (Form 1040).
- Your mortgage balances are $750,000 or less ($375,000 or less if married filing separately).
- You meet the eligibility criteria for the applicable tax years, which were 2018 through 2021.
To determine if you paid qualifying mortgage insurance premiums, you can refer to Form 1098, Mortgage Interest Statement, which will report the amount in Box 4. If the deductible amount is not included, you would need to contact the mortgage insurance issuer to determine the amount of your deduction.
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The tax deduction for PMI premiums is not part of the tax code
The PMI tax deduction was first introduced as part of the Tax Relief and Health Care Act of 2006. It was initially available for mortgages that originated in 2007 and beyond. Over the years, Congress has made several moves to extend or reinstate this deduction. In 2015, the Protecting Americans from Tax Hikes (PATH) Act extended the deduction for one year, covering the tax year 2015. In 2017, the Bipartisan Budget Act of 2018 retroactively extended the deduction for 2017.
In 2019, California Representative Julia Brownley introduced the Mortgage Insurance Tax Deduction Act of 2019, which would have made the mortgage insurance deduction a permanent part of the tax code. However, this bill did not pass. Instead, the Further Consolidated Appropriations Act of 2020 allowed PMI tax deductions for 2020 and 2021 and retroactively for 2018 and 2019 if taxpayers filed amended returns.
For eligible years, PMI was deductible only if taxpayers itemized their tax deductions. Taxpayers could use the deduction on line 8d of Schedule A (Form 1040) for amounts paid or accrued. The deduction was not allowed for taxpayers with an Adjusted Gross Income (AGI) over $109,000 or $54,500 for married couples filing separately in 2021.
While the PMI deduction is no longer available, homeowners may still be able to leverage other tax deductions, such as the mortgage interest they pay yearly and state and local real estate taxes. Additionally, homeowners can request to cancel their PMI once they have 20% equity in their home, which may save them money in the long run.
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Frequently asked questions
You can find the amount of mortgage insurance premiums you paid on the Form 1098 that your lender or servicer sends to you each year. It is listed in box 5, separate from the mortgage interest you paid (box 1).
You can claim the Private Mortgage Insurance (PMI) deduction for eligible years if you are claiming itemized deductions and the mortgage is secured by your first or second home.
The tax deduction for PMI premiums is not currently part of the tax code. The last time PMI premiums were deductible was for the tax year 2021, but this may change in the future.
