When Is PMI Tax Deductible?

Mortgage lenders generally require private mortgage insurance (PMI) when borrowers cannot put down at least 20% on a home loan. PMI premiums can add significant amounts to monthly mortgage payments. However, the pain was partially alleviated by a tax deduction for PMI policies issued after 2006. That deduction expired in the 2022 tax year. However, the One Big Beautiful Bill Act makes PMI premiums tax-deductible for qualifying individuals. Before filing your taxes, this is what you need to know about PMI premiums and tax deductions.

Talk to a financial advisor for guidance on this and other financial matters.

PMI Basics

Private mortgage insurance (PMI) protects lenders against the risk of default. ¹ It applies to home purchases with a down payment under 20% of the purchase price. PMI premiums are in addition to mortgage payments and can cost up to 2% of the loan amount annually. ²

Legislation making PMI tax-deductible was passed in 2006. It applied the deduction to policies issued in the 2007 tax year going forward. The measure has been periodically renewed, most recently with the One Big Beautiful Bill Act. ³ Also known as the Trump tax plan, this legislation makes PMI tax-deductible for homeowners. Homeowners become eligible in the 2026 tax year.

Who Can Deduct PMI

To qualify for deducting private mortgage insurance premiums, taxpayers must meet several requirements. ⁴

• You must itemize deductions rather than taking the standard deduction on your federal tax return.
• Income phaseouts begin for those with an adjusted gross income (AGI) under $100,000 or $50,000 if filing jointly.
• Your mortgage loan must have been taken out on or after January 1, 2007. 
• Your mortgage must cover the purchase or improvement of your primary home or second home. 

Value of PMI Deductibility 

The potential tax savings from deducting mortgage insurance premiums depend on your tax bracket. Also important is how much you pay toward PMI over the course of a year.

For example, let’s look at a taxpayer paying $4,000 per year for PMI on a $400,000 mortgage. They have an income of $100,000, putting them in the 22% tax bracket. ⁵ With the deduction, they can reduce their tax bill by $4,000 x 22% = $880.

This allows the homebuyer to save over $800 on their federal income tax return by deducting mortgage insurance.

How an Advisor Can Help Homeowners Save Money on Taxes

If you own a home, tax questions often arise around deductions, credits and changing rules. This is especially important to clarify when laws expire or are renewed.

You may be unsure whether certain expenses, such as mortgage insurance, interest or home improvements, still provide tax benefits. You may also wonder whether it is worth revisiting past tax years. This is a situation where the professional guidance of a financial advisor can be useful.

The decisions involved are rarely just yes-or-no. You may need to decide whether itemizing deductions makes sense or whether amending prior returns could produce a refund. It is also important to consider whether the tax benefit is large enough to justify the time and paperwork required. These choices depend on factors like your income, filing status, home value and mortgage structure.

An advisor can help you evaluate which housing-related tax breaks apply to your situation and which no longer do. This includes reviewing whether you would have benefited from deductions in prior years. Also consider how income phaseouts affect eligibility and how current tax law changes your options going forward. An advisor can also clarify how housing taxes fit into your financial plan, rather than treating them in isolation.

Questions to Ask Your Advisor

There are some specific questions to ask a financial advisor that can help determine tax liability.

• Does it make sense to amend past tax returns?
• How much will a potential refund realistically be?
• Does claiming itemized deductions outweigh the standard deduction in your case?
• How will refinancing, paying down a mortgage or removing PMI affect future tax outcomes?

Timing often matters with housing-related tax decisions. Filing amended returns is subject to deadlines. Additionally, changes in income or filing status can alter eligibility from year to year. An advisor can help you determine whether action is still possible and whether acting now or waiting is more appropriate for your situation.

Overall, an advisor’s value lies in helping you navigate complexity and trade-offs. Instead of guessing which deductions apply or relying on outdated assumptions, you can use informed analysis. This will help you decide whether tax planning steps related to your home are worth pursuing. You can also assess how they fit into your long-term financial plan.

Bottom Line 

In the past, deducting private mortgage insurance offered modest but helpful tax relief to some middle-income homebuyers. After the deduction expired, it was renewed for the 2026 tax year. Now, eligible taxpayers can claim the deduction going forward. While likely not amounting to more than several hundred dollars, this deduction may warrant filing the extra paperwork.

Tax Planning Tips for Beginners

• Speak with a financial advisor to learn whether you qualify to amend past returns and deduct mortgage insurance for added refunds. SmartAsset’s free tool doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Use SmartAsset’s income tax calculator to get a heads-up on how much you’re likely to owe next time you file a return.

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