Reporting Mortgage Insurance Premiums: A Comprehensive Guide

If you're a homeowner, you may have been able to deduct your mortgage insurance premiums from your taxes in previous years. However, this deduction is no longer available as of the 2021 tax year. The mortgage insurance premium deduction allowed homeowners to reduce their taxable income by the amount of the premiums they paid. To claim this deduction, homeowners had to meet certain criteria, such as having a qualified mortgage insurance contract and itemizing their deductions. Now, homeowners cannot reduce their taxable income by claiming deductions for mortgage insurance premiums, and must find other ways to lower their tax burden.

The mortgage insurance premium deduction is no longer available for tax years after 2021

The mortgage insurance premium deduction was a provision that allowed eligible homeowners to deduct their Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP) from their federal taxes. This deduction was first introduced through the Tax Relief and Health Care Act of 2006 and was initially available for mortgages originating in 2007 and beyond. Over the years, this deduction has been extended several times, with the most recent extension covering tax years 2018 through 2021.

However, the mortgage insurance premium deduction is no longer available for tax years after 2021. The deduction expired at the end of 2021, and Congress has not extended this provision. This means that homeowners can no longer claim a deduction for PMI or MIP premiums on their federal income taxes starting from the 2022 tax year. For eligible homeowners, the deduction was a way to reduce their taxable income by the amount of PMI or MIP premiums paid.

The eligibility criteria for the deduction included having a qualified mortgage insurance contract issued after December 31, 2006, with the mortgage being acquisition debt for a qualified residence (a new mortgage). Additionally, taxpayers needed to itemize their deductions and have an adjusted gross income (AGI) below certain thresholds. For 2021, the deduction was not allowed for taxpayers with an AGI over $109,000 or $54,500 for married couples filing separately.

While the mortgage insurance premium deduction is no longer available, there may be other tax benefits or deductions related to homeownership that individuals can take advantage of. It is always recommended to consult with a tax professional or refer to the IRS website for the most up-to-date information on tax laws and eligible deductions.

In February 2025, a new bill called the Mortgage Insurance Tax Deduction Act of 2025 was introduced to bring back the tax deduction for mortgage insurance premiums. However, as of March 2025, this bill is still making its way through the legislative process and has not been enacted into law.

You can claim the Private Mortgage Insurance (PMI) deduction for eligible years if you are claiming itemized deductions

Private Mortgage Insurance (PMI) is often required for homebuyers who put down less than 20% on their homes. Lenders view this as protection if the borrower defaults on the loan. Typically, you'll have to pay PMI until you've built enough home equity, usually 20%, at which point you can request that the lender remove the PMI from your mortgage payments.

The Private Mortgage Insurance (PMI) deduction was available for eligible years, specifically for the 2018–2021 tax years. In 2019, Congress reintroduced a federal tax deduction that allowed homeowners paying PMI to write off the premiums for these years. However, this deduction expired at the end of 2021, and Congress has not extended it. Therefore, it is not available for the 2022 tax year and beyond.

If you were eligible for the PMI deduction in the eligible years but did not take it, you may still be able to claim it retroactively by filing an amended return. This can be done by using the deduction on line 8d of Schedule A (Form 1040) for amounts paid or accrued. It's important to note that the deduction was not allowed for taxpayers with an Adjusted Gross Income (AGI) over $109,000 or $54,500 for married couples filing separately in 2021.

To calculate your savings from the PMI deduction, you would multiply your claimed deduction (the amount above the standard deduction) by your income tax percentage. For example, if your claimed deduction was $1,440 and you were in the 20% tax bracket, your annual tax savings would be approximately $288 ($1,440 x 0.20).

The mortgage insurance deduction only applies to refinanced funds up to the original loan amount

The mortgage insurance premium deduction was available for a limited period. It was applicable for the tax years 2018 to 2021, and taxpayers could avail of it by filing amended federal tax returns. However, this deduction is no longer available for the 2022 tax year or subsequent years. It's important to note that even when the deduction was available, it only applied to specific scenarios.

One such scenario is when you refinance your mortgage. If you choose to refinance your mortgage with a new loan, the mortgage insurance deduction only applies to the refinanced funds up to the original loan amount. In other words, if you took out additional money with the new loan (as in a cash-out refinance), the deduction does not extend to that extra amount. This distinction is crucial, as it directly impacts the amount of money you can deduct for your mortgage insurance premiums.

For example, let's say you originally purchased your home with an $80,000 mortgage, and you diligently built up your home equity to 20%. Over time, you decide to refinance your mortgage and take out a new loan for $100,000, using $80,000 to pay off the original loan and keeping the remaining $20,000 for home improvements. In this case, the mortgage insurance deduction would only apply to the first $80,000 of the refinanced loan, which matches the original loan amount. The additional $20,000 that you took out for home improvements would not be eligible for the deduction.

It's worth noting that the mortgage insurance deduction also came with income restrictions. In 2021, for instance, the deduction was not allowed for taxpayers with an adjusted gross income (AGI) of more than $109,000, or $54,500 for married couples filing separately. Additionally, the deduction would be reduced by 10% for each $1,000 that a taxpayer's AGI exceeded certain thresholds. These income limits further influenced the applicability of the deduction for those seeking to refinance their mortgages.

You must receive Form 1098 or a similar statement from the lender if you make payments to a financial institution

If you make payments to a financial institution, you must receive Form 1098 or a similar statement from the lender. This form will show the amount of interest to enter on line 13. You should also include on this line any other interest payments made on debts secured by a qualified home for which you did not receive a Form 1098. It's important to note that you should not include points or mortgage insurance premiums on this line.

Form 1098, also known as the Mortgage Interest Statement, is used to report mortgage interest payments above $600 to the IRS. This form will include only points that you can fully deduct in the year paid. However, it may report points that you cannot deduct, particularly if you are filing separately as a married couple or have mortgages for multiple properties. You must carefully deduct only those points that are legally allowable.

Additionally, certain points not included on Form 1098 may also be deductible, either in the year paid or over the life of the loan. If there is a portion of the deductible amount or deductible points not shown on Form 1098, you must enter these amounts on Schedule A: Line 8b – Deductible mortgage interest you paid that wasn’t reported on the Form 1098. You can also deduct mortgage interest on rental property as an expense of renting out a property. This mortgage interest should be reported on Schedule E, not Schedule A.

It's important to note that mortgage insurance premiums themselves are not required to be reported on Form 1098 at this time. However, you may use Form 1098 to report mortgage insurance premiums (MIP) of $600 or more that you received during the calendar year in the course of your trade or business from an individual, including a sole proprietor, but only if section 163(h)(3)(E) applies.

You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness

The home mortgage interest deduction (HMID) allows homeowners to deduct mortgage interest paid on up to $750,000 of their loan principal. The maximum mortgage principal eligible for deductible interest was reduced to $750,000 from $1 million in 2017. The same law nearly doubled the standard deduction, making it more advantageous than itemized deductions for many, even for homeowners with mortgages. The amount of the deduction is a fraction of the interest paid on the mortgage, even for homeowners who itemize their deductions and qualify for the mortgage interest tax deduction.

For mortgages taken out after December 15, 2017, to buy, build, or substantially improve your home (called home acquisition debt), the limit is $750,000 or less ($375,000 or less if married filing separately). However, a taxpayer who entered into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchased such a residence before April 1, 2018, is considered to have incurred the home acquisition debt prior to December 16, 2017, and may use the 2017 threshold amounts of $1,000,000 ($500,000 for married filing separately).

Mortgage interest is only deductible if your mortgage is secured by your home. It cannot be a personal loan. The mortgage must be secured by your primary or secondary home. Any other homes, such as a third or fourth home, do not qualify for a mortgage interest deduction. A 20% down payment is typically required for a mortgage. It also allows you to skip the expense of private mortgage insurance (PMI).

To claim your deduction, you should receive Form 1098 or a similar statement from the lender if you make payments to a financial institution or a person in the business of making loans. This form will show the amount of interest to enter on line 13. Also, include on this line any other interest payments made on debts secured by a qualified home for which you didn't receive a Form 1098. Don't include points or mortgage insurance premiums on this line.

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