Is Your Private Mortgage Insurance Premium Tax Deductible?

Mortgage insurance – private or FHA – is no longer an itemizable tax deduction.

The mortgage insurance premium deduction expired, and Congress hasn’t renewed it. Will it be reinstated? Historically, Congress has renewed the benefit retroactively on a year-by-year basis, so it’s possible. 

If the deduction does come back, note that it’s only available to itemizing taxpayers. You can read about the eligibility rules below. 

You pay private mortgage insurance (PMI) or mortgage premiums on FHA loans when you put down less than 20%. It can be about $83 a month or so on a $200,000 mortgage at a 5% interest rate. 

Do You Qualify for the Mortgage Insurance Premium Tax Deduction?

If you can itemize, here’s what qualifies you:

  • You got your loan in 2007 or later.
  • Your mortgage is for your primary residence or a second home that’s not a rental property.
  • Your adjusted gross income is no more than $109,000. The deduction phases out once your AGI exceeds $100,000 ($50,000 for married filing separately) and disappears entirely at more than $109,000 ($54,500 for married filing separately).

How to File for the Deduction

You’ll have to itemize and use Schedule A.

If you make no more than $100,000 a year, you’ll fill in the amount of mortgage insurance premiums you paid last year. Don’t include pre-paid premiums for this year. You’re doing taxes based on last year’s income and expenses, so this year’s premiums don’t count even if you pre-paid them last year. (More about deducting prepaid and upfront mortgage insurance here.)

If your adjusted gross income is between $100,000 and $109,000, use the worksheet included with Schedule A to figure out how much you get to deduct.

How Much Can You Save?

It depends on how much you’re paying and what your tax bracket is. Industry experts use this rule of thumb: You’ll pay $50 a month in premiums for every $100,000 of financing. Keep in mind, though, that the amount of the down payment, type of loan, and lender requirements can all affect your actual cost.

For example, if you put 5% down on a $200,000 house, you’ll pay monthly PMI premiums of about $125. Increase your down payment to 10%, and you’ll pay less than $80 a month.

So how does this affect your tax bill? Let’s say your adjusted gross income is $100,000. You bought a $200,000 house, put down 5%, and paid $1,500 in PMI premiums ($125 times 12 months). The deduction for PMI cuts your taxable income by $1,500. If you’re in the 12% tax bracket, you save $180 on your tax bill ($1,500 x 12%), and if you’re in the 22% tax bracket, you save $330 ($1,500 x 22%).

The Best Savings of All: Canceling PMI

Although a tax deduction is nice — if you can take it — getting rid of PMI altogether is even nicer.

You can cancel your PMI when you have 20% equity in your home. Lenders are required to automatically cancel it once you have 22% equity. If you think you’re at that threshold, find out more about canceling your PMI.

Related: How Long to Keep Tax Records: A Checklist

This article provides general information about tax laws and consequences, but shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice; tax laws may vary by jurisdiction.

Richard Koreto

Richard Koreto

Richard Koreto is a freelance writer. He's been editor of many financial magazines and is the author of "Run It Like a Business," a practice management book for financial planners. He and his wife own a pre-Civil War house in New York.