Can You Claim Private Mortgage Insurance on Your Taxes?
Learn if your Private Mortgage Insurance is tax deductible and navigate the eligibility requirements for claiming it.
Many homeowners often wonder if their private mortgage insurance (PMI) payments can offer any tax benefits. While mortgage interest is a widely recognized deduction, the tax treatment of PMI has been less consistent and subject to legislative changes. This article explores what private mortgage insurance entails and clarifies its deductibility status for tax purposes.
What Private Mortgage Insurance Is
Private mortgage insurance (PMI) is a type of insurance policy required by mortgage lenders when a homebuyer makes a down payment of less than 20% of the home’s purchase price. This insurance protects the lender against potential losses if the borrower defaults on their loan. PMI safeguards the lender’s investment, not the borrower’s equity in the property.
PMI is usually paid as a monthly premium, added to the regular mortgage payment. In some cases, it may be paid as a single, upfront premium at closing, or as a combination of both. PMI mitigates risk for the lender when a substantial down payment is not made. Borrowers can request to cancel PMI once they have built sufficient equity in their home, typically when the loan-to-value ratio reaches 80% or below.
Determining Eligibility for the Deduction
The ability to deduct private mortgage insurance premiums has been a temporary tax provision. This deduction was last available for tax years through 2021. For the 2022, 2023, and 2024 tax years, private mortgage insurance premiums are not deductible on federal income taxes. Taxpayers should currently assume this deduction is unavailable.
When the deduction was active, specific criteria applied. The mortgage insurance contract had to be issued after December 31, 2006. Premiums had to be paid in connection with “acquisition debt” for a qualified residence. Acquisition debt refers to a mortgage taken out to buy, build, or substantially improve a main home or a second home. The debt also had to be secured by the residence.
The deduction was also subject to Adjusted Gross Income (AGI) limitations, meaning higher-income taxpayers saw their deductible amount reduced or eliminated. For instance, in 2021, the deduction began to phase out for taxpayers with an AGI exceeding $100,000 ($50,000 for married individuals filing separately). The deductible amount was reduced by 10% for every $1,000 (or fraction thereof) that AGI surpassed this threshold.
The deduction was completely eliminated for taxpayers whose AGI reached $109,000 ($54,500 for married individuals filing separately) in 2021. To claim the deduction, taxpayers were required to itemize their deductions on Schedule A (Form 1040) rather than taking the standard deduction.
Claiming the Mortgage Insurance Premium Deduction
When the PMI deduction was available, taxpayers reported premiums on their federal tax return. The deductible amount was included on Schedule A (Form 1040) in the “Interest You Paid” section, alongside other housing-related expenses like home mortgage interest.
Taxpayers located the total PMI paid on Form 1098, “Mortgage Interest Statement.” This form reports premiums in Box 5, separate from mortgage interest in Box 1.
If a taxpayer’s Adjusted Gross Income (AGI) fell within the phase-out range, the deductible amount of PMI had to be calculated accordingly. The final deductible amount was then entered on Schedule A, line 8d, or the equivalent line designated for mortgage insurance premiums.