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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
by TurboTax• 139• Updated 1 month ago. The itemized deduction for mortgage insurance premiums has expired, so you can no longer claim the deduction for tax years 2022 and after.
Are private mortgages tax deductible? ›
Yes. The interest portion of your mortgage payment is tax-deductible. The deduction doesn't apply to the mortgage principal, down payment or mortgage insurance premiums (after tax year 2021). Most buyer's closing costs don't count either, except for discount points (which you pay to reduce your interest rate).
Is personal mortgage insurance tax deductible? ›
Currently, PMI is not deductible for the 2022 or later tax years. That could retroactively change, however, if Congress passes an extension allowing filers to claim deductions for mortgage insurance premiums paid in those years.
Is private insurance tax deductible? ›
Is health insurance tax-deductible? Health insurance premiums are deductible on federal taxes, in some cases, as these monthly payments are classified as medical expenses. Generally, if you pay for medical insurance on your own, you can deduct the amount from your taxes.
Is the mortgage insurance deduction being phased out? ›
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.
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.
Which mortgage costs are tax deductible? ›
If you bought a home before or during 2021, private mortgage insurance (PMI) premiums are deductible. FHA mortgage insurance and VA funding fees. Government-backed loans typically cover the risks and defray the costs of their programs by charging mortgage insurance, funding fees or guarantee fees.
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.
Is the mortgage interest 100% tax deductible? ›
You can deduct the mortgage interest you paid during the tax year on the first $750,000 of your mortgage debt for your primary home or a second home. If you are married filing separately, the limit drops to $375,000.
Can you write off homeowners insurance on your taxes? ›
Some taxpayers have asked if homeowner's insurance is tax deductible. Here's the skinny: You can only deduct homeowner's insurance premiums paid on rental properties. Homeowner's insurance is never tax deductible your main home.
Unlike PMI, homeowners insurance is unrelated to your mortgage except for the fact that mortgage lenders require it to protect their interest in the home. While mortgage insurance protects the lender, homeowners insurance protects your home, the contents of your home and you as the homeowner.
Can one person claim all mortgage interest if joint purchase? ›
Mortgage interest is deductible for the person who paid it. If you paid the whole mortgage from an individual account, you get 100% of the deduction. If the mortgage is paid from a joint account, each spouse typically deducts 50%.
What type of insurance is not tax deductible? ›
While many kinds of business insurance are tax deductible, the IRS prohibits businesses from writing off the following premiums: Certain life insurance or annuity premiums. Premiums paid on insurance to secure loans. Premiums paid for a policy that covers earnings lost due to sickness or disability.
Is personal property insurance tax deductible? ›
If your home is used solely for your personal residence, then your homeowners insurance is not tax deductible. According to the Internal Revenue Service, only private mortgage insurance can be deducted – and this does not apply to a homeowners policy. However, there are exceptions.
How much of insurance premiums are tax deductible? ›
You can only deduct the out-of-pocket portion of your employer-sponsored health insurance premium if you take the itemized deduction on your tax return. And even then, “the premiums can only be deducted to the extent that they and other medical costs exceed 7.5% of your Adjusted Gross Income (AGI),” says Hunsaker.
What is the mortgage deduction limit for 2024? ›
Before the TCJA, the mortgage interest deduction limit was on loans up to $1 million. Now, the loan limit is $750,000. For the 2024 tax year, married couples filing jointly, single filers and heads of households can deduct up to $750,000. Married taxpayers filing separately can deduct up to $375,000 each.
What are the standard deductions for 2024? ›
For 2024, the standard deduction amount has been increased for all filers, and the amounts are as follows.
- Single or Married Filing Separately—$14,600.
- Married Filing Jointly or Qualifying Surviving Spouse—$29,200.
- Head of Household—$21,900.
Some taxpayers have asked if homeowner's insurance is tax deductible. Here's the skinny: You can only deduct homeowner's insurance premiums paid on rental properties. Homeowner's insurance is never tax deductible your main home.
