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Is mortgage insurance tax deductible?

Yes. No. Yes. No. Yes. That's the ever-changing answer to the question "Is PMI tax deductible?"

If you put down less than 20 percent when you purchased your home, chances are you're paying mortgage insurance. While the deductibility of PMI premiums has been an on-again, off-again affair for years, homeowners are again in luck, as it is "on again" through tax year 2020.

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. That's the case for tax year 2020, but this may change in the future.

The "extenders" in the "Further Consolidated Appropriations Act, 2020" also made PMI premiums retroactively deductible for the tax year 2018, which they previously weren't. If you filed with itemized deductions on Schedule A back in 2018, you might consider filing an amended tax return, to capture the MI deduction for that year, if it is worth it in your situation. In general, the IRS says you have three years from the date you originally filed to file an amended return.

You can find the amount of mortgage insurance premiums you paid on the Form 1098 that your lender or servicer sends to you each year. It is listed in box 5, separate from the mortgage interest you paid (box 1).

The official IRS code covering the deductibility of mortgage interest (which now includes PMI premiums) can be seen in Publication 936. However, official IRS documents have not yet been updated to reflect this change for 2020, but of course will be when the annual revisions and updates are put in place on the IRS website.

Related: HSH's comprehensive Guide to Mortgage Insurance

As when the deduction for PMI costs were last regularly available (for MI premiums paid though 2017), there were limitations. The PMI policy's mortgage had to be originated after 2006; the deduction was reduced once your Adjusted Gross Income (AGI) exceeded $100,000 ($50,000 if married filing separately) and completely eliminated with an AGI above $109,000 ($54,500 married filing separately). When available, premiums for mortgage insurance were treated exactly the same as mortgage interest for deduction purposes.

Of course, with the standard deduction raised significantly as a part of the Tax Cuts and Jobs Act of 2017 (TCJA), many homeowners who might have formerly itemized mortgage-ralated deductions in order to deduct the mortgage interest and PMI premiums they paid now simply take the standard deduction, which simplifies filing returns.

Calculator: Learn PMI costs and when you can cancel PMI

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Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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