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Key takeaways
- The mortgage insurance (PMI) deduction expired after the 2021 tax year.
- For eligible years, PMI was deductible only if you itemized your tax deductions.
- Most borrowers pay mortgage insurance premiums when putting down less than 20% on a home.
You might not remember it, but in 2019, Congress reintroduced a federal tax deduction for private mortgage insurance (PMI), that extra monthly fee lenders charge if you make a down payment under 20 percent. This break allowed homeowners who were paying mortgage insurance the ability to write off the premiums for tax years 2018, 2019, 2020 and 2021 if they itemized their tax deductions.
The deduction expired at the end of 2021. However, if you didn’t claim the PMI tax deduction when you were eligible, you may be able to file an amended return and claim it retroactively.
Keep in mind: The deadline to file your 2023 taxes was April 15, 2024. If you requested an extension, you have until Oct. 15, 2024 to file.
Is mortgage insurance tax-deductible?
No, private mortgage insurance isn’t tax-deductible now. The mortgage insurance deduction was only available for eligible homeowners for the 2018–2021 tax years.
“The tax deduction for private mortgage insurance expired at the end of 2021, and Congress has not extended this provision,” says Dana Ronald, the CEO of the Tax Crisis Institute, a consultancy serving California and Nevada. “This means homeowners can no longer claim a deduction for PMI premiums on their federal income taxes starting from the 2022 tax year.”
PMI tax deduction requirements
If you were eligible for the PMI tax deduction but didn’t take it, you might be able to amend old returns to claim it. If you do, keep in mind:
- The deduction is allowed only if the mortgage on which you paid PMI was taken out on or after Jan. 1, 2007.
- A home refinanced after Jan. 1, 2007 still qualifies for PMI deduction if it was your primary residence.
- A second home might qualify for the deduction if the mortgage was taken out on or after Jan. 1, 2007, but it depends on how the home was used. PMI on a second property only qualifies if the home was used by you personally, not rented out.
There were also restrictions to PMI deductions, including:
- The mortgage insurance deduction only applied to refinanced funds up to the original loan amount, not any extra money you took out with the new loan (as in a cash-out refi).
Once again, this tax deduction is not available for the 2022 tax years and beyond.
How much can you save with the PMI tax deduction?
Homeowners typically pay between $30 and $70 a month in PMI premiums for every $100,000 of financing, according to Freddie Mac estimates. The premiums comprise part of your monthly repayments, along with the mortgage’s principal and interest. However, the size of the down payment, loan type and lender requirements can all affect your actual cost.
How much you can save depends on how much you owe and your tax bracket. Let’s say your adjusted gross income was $100,000 and you paid $120 per month in PMI premiums when the PMI tax deduction was still available. Assuming you itemize deductions and that you can fully deduct all of the premiums, you would reduce your taxable income by $1,440.
PMI tax deduction calculation example
To calculate your savings, you’ll multiply your claimed deduction (amount of deduction you are able to deduct above standard deduction) by your income tax percentage: claimed deduction x tax percentage = annual tax savings.
In this case, if you were in the 20 percent bracket, your annual tax savings would be in the neighborhood of $288 annually ($1,440 X .20). Not a huge amount, but every little bit helps — especially since, if you put less cash down, you might have incurred a higher interest rate on your mortgage in the first place.
PMI tax deduction FAQ
No, the mortgage insurance tax deduction has not been available since the 2021 tax year.
At this time, mortgage insurance premium tax deductions are not available on any loans, including FHA loans.
Once your loan-to-value ratio falls below 80 percent, you can request in writing that your mortgage servicer cancel your PMI. Learn about one Bankrate writer’s experience about how rising home values helped him remove PMI and lower his mortgage bill.
Additional reporting by Taylor Freitas
FAQs
Since the 2022 tax year, it's no longer possible to take deductions on new mortgage insurance payments, as the PMI deduction has expired. Under certain circ*mstances, however, you can claim it retroactively for certain years through an amended tax return.
Is private mortgage interest tax deductible? ›
The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and isn't deductible.
Is mortgage insurance tax deductible on an investment property? ›
Can you deduct mortgage insurance premiums on rental property? In general, you can deduct mortgage insurance premiums in the year paid. However, if you prepay the premiums for more than one year in advance, for each year of coverage you can deduct only the part of the premium payment that will apply to that year.
What part of a mortgage is tax deductible? ›
You can deduct the interest you paid on the first $750,000 of your mortgage during the relevant tax year. For married couples filing separately, that limit is $375,000, according to the Internal Revenue Service.
Is paying PMI worth it? ›
PMI is an avoidable extra cost associated with buying a home. That said, sometimes paying PMI is the right move; it can help you get into a home that would otherwise be out of reach.
Is mortgage insurance tax deductible in the UK? ›
Is mortgage protection insurance tax-deductible? If you purchased insurance on or before 13 March 1984, you should be able to claim tax relief on life insurance. Any insurance bought after this date isn't tax-deductible.
Is my house insurance tax deductible? ›
In general, homeowners insurance premiums are not tax deductible. If you use your home as a home – without deriving any income from it – your expenses, including insurance premiums, are not deductible.
Is a mortgage on rental property tax deductible? ›
As a rental property owner, you can claim deductions to offset rental income and lower taxes. Broadly, you can deduct qualified rental expenses (e.g., mortgage interest, property taxes, interest, and utilities), operating expenses, and repair costs.
Are mortgage insurance premiums deductible for home offices? ›
Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements.
What mortgage fees are tax deductible? ›
Typically, the only closing costs that are tax-deductible are payments toward mortgage interest, buying points or property taxes.
Private Mortgage Insurance is considered an itemized deduction and will not impact your return unless your itemized deductions surpass your standard deduction.
Can your taxes be included in your mortgage? ›
The Takeaway
With most home loans, yes. Typically, you pay one-twelfth of the amount owed every month into escrow, and your servicer is then responsible for paying the property tax bill for you.
Can I claim mortgage interest on my tax return? ›
The mortgage interest deduction is a tax incentive for homeowners. This itemized deduction allows homeowners to subtract mortgage interest from their taxable income, lowering the amount of taxes they owe. Homeowners can also claim the deduction on loans for second homes providing that they stay within IRS limits.
Is PMP certification tax deductible? ›
Can i deduct "project management professional" and "certified scrum master" certification renewal cost as part of my taxes? Yes, these are qualified employee expenses that can be included as Miscellaneous deductions on your Schedule A. Even though they are not mandatory, they are ordinary and necessary.
How to remove PMI? ›
You can remove PMI, or private mortgage insurance, from your mortgage after you have established enough equity in your home. You will need at least 20% in equity. At that point, you can request to have it removed or wait for it to automatically drop off when you have 22% in equity.
Are homeowners insurance deductibles tax deductible? ›
Yes, it's possible to qualify for tax deductions on your homeowners insurance deductibles — the amount you pay to an insurer before they pay out a claim. However, the $100/10% rule must be met in order to qualify.
