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Key takeaways
- The mortgage insurance (PMI) deduction has expired for 2022, and guidelines for the 2023 tax year have not yet been determined.
- For eligible years, PMI is deductible only if you itemize your tax deductions.
- Most borrowers pay mortgage insurance premiums when putting down less than 20 percent on a home.
You might not know it, but in 2019, Congress reintroduced a federal tax deduction for private mortgage insurance (PMI). This 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 is not currently available for the 2022 and 2023 tax years.
Keep in mind:Monday, April 15 is the 2024 tax filing deadline.
Is mortgage insurance tax-deductible?
No, private mortgage insurance isn’t tax-deductible. The mortgage insurance deduction was made available again for eligible homeowners for the 2018, 2019, 2020 and 2021 tax years. It has not been renewed for the 2022 and 2023 tax years.
PMI tax deduction requirements
To take the PMI tax deduction for tax years 2018, 2019, 2020 or 2021, keep in mind:
- The deduction is allowed only if the mortgage for which you pay PMI was taken out on or after Jan. 1, 2007.
- A home refinanced after Jan. 1, 2007 still qualifies for PMI deduction if it is 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 is used. PMI on a second property only qualifies if the home is used by you personally, not rented out.
There are also restrictions to PMI deductions, including:
- The mortgage insurance deduction will only apply to refinanced funds up to the original loan amount, not any extra cash you took out with the new loan.
Once again, this tax deduction is not available for the 2022 and 2023 tax years.
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. 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 is $100,000 and you’re paying $120 per month in PMI premiums. 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) X income tax percentage: claimed deduction x tax percentage = annual tax savings.
In this case, if you’re in the 20 percent bracket, your annual tax savings would be in the neighborhood of $288 annually ($1,440 X .20).
PMI tax deduction FAQ
No, the mortgage insurance tax deduction has not been available since the 2021 tax year.
Mortgage insurance premiums on any loans, including FHA loans, are not tax deductible at this time.
FAQs
Key takeaways
Can I claim mortgage insurance on my taxes? ›
The mortgage insurance premium deduction is available through tax year 2020. Starting in 2021 the deduction will not be available unless extended by Congress.
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 it worth claiming mortgage interest on taxes? ›
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 mortgage insurance tax deductible in 2024? ›
For a little more than a decade, PMI was tax deductible for homeowners who met eligibility requirements and itemized their deductions. Since the 2022 tax year, it's no longer possible to take deductions on new mortgage insurance payments, as the PMI deduction has expired.
Where to put mortgage insurance on tax return? ›
Select Itemized Deductions. Select Mortgage Interest and Expenses. Select Private Mortgage Insurance (PMI) Deduction.
Is FHA mortgage insurance tax deductible? ›
The tax deduction for PMI premiums (or Mortgage Insurance Premiums (MIP) for FHA-backed loans) is not part of the tax code, but since the financial crisis has generally been authorized by Congress as parts of other bills and "extended" to cover the most recent tax year.
What interest is tax deductible? ›
According to the IRS, only a few categories of interest payments are tax-deductible: Interest on home loans (including mortgages and home equity loans) Interest on outstanding student loans. Interest on money borrowed to purchase investment property.
How do I calculate how much of my mortgage interest is deductible? ›
Divide the maximum debt limit by your remaining mortgage balance, then multiply that result by the interest paid to figure out your deduction. Let's consider an example: Your mortgage is $1 million. Since the deduction limit is $750,000, you'll divide $750,000 by $1 million to get 0.75.
Why is mortgage interest no longer tax deductible? ›
If the loan is not a secured debt on your home, it is considered a personal loan, and the interest you pay usually isn't deductible. Your home mortgage must be secured by your main home or a second home. You can't deduct interest on a mortgage for a third home, a fourth home, etc.
The two main tax benefits of owning a home in terms of credit include the mortgage credit certificate (MCC) and the potential for a residential energy credit.
Is car interest tax deductible? ›
Interest paid on personal loans, car loans, and credit cards is generally not tax-deductible. However, you may be able to claim interest you've paid when you file your taxes if you take out a loan or accrue credit card charges to finance business expenses.
Why isn't homeowners 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.
How does a mortgage tax deduction work? ›
The home mortgage interest deduction (HMID) allows itemizing homeowners to deduct mortgage interest paid on up to $750,000 of their loan principal. The Tax Cuts and Jobs Act (TCJA) reduced the maximum mortgage principal eligible for deductible interest to $750,000 from $1 million when it was passed in 2017.
Is mortgage insurance worth it? ›
In truth, mortgage protection life insurance policies are generally ill-advised. First of all, there's no flexibility. Unlike regular term life insurance, where beneficiaries may use insurance payouts as they see fit, most insurers send benefit payments directly to lenders, so your beneficiaries never see any money.
Are property taxes deductible in the IRS? ›
As an individual, your deduction of state and local income, general sales, and property taxes is limited to a combined total deduction of $10,000 ($5,000 if married filing separately). You may be subject to a limit on some of your other itemized deductions also.
Can you write off mortgage insurance on investment property? ›
MORTGAGE INSURANCE INFORMATION
You can only deduct mortgage insurance on your primary residence and a second home. Additionally, if your business owns a building covered by mortgage insurance, it could be considered an ordinary and necessary business expense and be deductible on your Schedule C.
Are car payments tax deductible? ›
But if you bought a car and are making monthly payments, or you're leasing a car, the payments are not actually tax-deductible. But there are still car-related business expenses that you can write off and save significantly on your taxes.
