Taxation and Regulatory Compliance

Can You Write Off Private Mortgage Insurance (PMI)?

Uncover the financial implications of private mortgage insurance for your taxes. See if your payments offer a valuable deduction.

Private Mortgage Insurance (PMI) is a common expense for many homeowners, particularly those who made a smaller down payment when purchasing their home. This insurance protects the mortgage lender in case the borrower defaults on their loan. The tax deductibility of these premiums has been a fluctuating topic, with changes in tax law over time.

Understanding Private Mortgage Insurance

PMI is typically required when a homebuyer makes a down payment of less than 20% of the home’s purchase price. Its primary purpose is to safeguard the lender from financial loss if the borrower stops making mortgage payments and the home’s value isn’t enough to cover the outstanding loan balance. This differs from homeowner’s insurance, which protects the homeowner’s property and belongings.

The requirement for PMI is tied to the loan-to-value (LTV) ratio; if the loan amount exceeds 80% of the home’s value, PMI becomes necessary. Historically, the tax deductibility of PMI premiums has been a temporary provision, often extended by Congress through various legislative acts.

Current Rules for PMI Deductibility

For the most recent tax years, specifically 2022, 2023, and 2024, private mortgage insurance premiums are not deductible on federal income taxes. The deduction for mortgage insurance premiums expired at the end of the 2021 tax year, and Congress has not extended this provision. This means homeowners cannot claim a deduction for PMI premiums paid starting from the 2022 tax year.

Despite current non-deductibility, legislative efforts are underway to reinstate this deduction. Proposed bills aim to bring the tax deduction back and potentially raise income limits for eligibility.

When the deduction was last available, it applied to mortgages on a principal residence or a qualified second home. There were also Adjusted Gross Income (AGI) phase-out limits that affected the deductible amount. For example, in 2021, the deduction was reduced for taxpayers with an AGI exceeding $100,000 ($50,000 if married filing separately) and completely eliminated for AGIs above $109,000 ($54,500 for married filing separately). The PMI also had to be provided by a qualified insurer.

Claiming the PMI Deduction

Since PMI is not deductible for the 2022, 2023, or 2024 tax years, there are no specific forms or lines to claim this deduction. However, if the deduction is retroactively reinstated by Congress, taxpayers would typically claim it as an itemized deduction on Schedule A (Form 1040), Itemized Deductions.

To claim any itemized deduction, taxpayers must choose to itemize rather than take the standard deduction. Lenders typically provide Form 1098, Mortgage Interest Statement, which would show the amount of mortgage insurance premiums paid in Box 5.

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