Is Your Private Mortgage Insurance Tax Deductible?
Navigate the tax rules for Private Mortgage Insurance (PMI). Learn if your premiums are deductible and what changed.
Private Mortgage Insurance (PMI) is a common aspect of homeownership for many, particularly those who make a smaller down payment. Many homeowners wonder if these premiums offer any tax benefits. Private mortgage insurance premiums paid in 2022, 2023, and later years are not tax deductible on federal income tax returns. The federal deduction for mortgage insurance premiums expired at the end of 2021.
Understanding Private Mortgage Insurance
Private mortgage insurance (PMI) protects the lender, not the borrower, if a homeowner defaults on their mortgage loan. Lenders typically require PMI when a borrower makes a down payment of less than 20% of the home’s purchase price on a conventional mortgage. This insurance mitigates the increased risk the lender takes on with a lower down payment.
PMI payments are usually a monthly premium added to the mortgage payment. However, some lenders may offer options for an upfront, single-premium payment at closing, or a combination of an upfront payment and lower monthly premiums. While PMI adds to the cost of homeownership, it can enable borrowers to qualify for a mortgage sooner than if they had to save a 20% down payment.
Eligibility for the Deduction
The ability to deduct mortgage insurance premiums was a provision called the Mortgage Insurance Premium Deduction. This deduction allowed taxpayers to treat PMI premiums as deductible mortgage interest. It was extended multiple times by Congress but ultimately expired on December 31, 2021. For tax years 2022 onwards, this deduction is unavailable.
When the deduction was active, conditions determined eligibility. The mortgage insurance contract had to be issued after 2006. The mortgage itself needed to be acquisition debt for a qualified residence, used to buy or improve a primary or second home.
A taxpayer’s Adjusted Gross Income (AGI) determined the deductible amount. The deduction began to phase out for taxpayers with an AGI exceeding certain thresholds (e.g., $100,000-$109,000 AGI). To claim the deduction, taxpayers were also required to itemize their deductions on Schedule A of Form 1040. Since the deduction expired, these conditions are no longer relevant.
Reporting PMI on Your Tax Return
Although the federal deduction for private mortgage insurance premiums expired, taxpayers will still see the amount of PMI paid reported on tax forms. Lenders typically provide this information on Form 1098, Mortgage Interest Statement. Box 4 of Form 1098 reports mortgage insurance premiums.
If the deduction were still active, PMI premiums would have been reported on Schedule A (Form 1040), Itemized Deductions. This amount was included in the “Interest You Paid” section, treated like mortgage interest. For tax years 2022 and beyond, while Form 1098 will continue to show the amount of PMI paid in Box 4, taxpayers cannot deduct this amount on their federal tax return due to the deduction’s expiration.