How, When And Where Do You Deduct Mortgage Insurance? + FAQs

Mortgage insurance premiums are deductible on U.S. federal taxes only if you itemize your deductions and meet the IRS’s income and loan qualifications – and whether you can deduct them depends on the type of insurance.

Fewer than 1 in 10 taxpayers itemize deductions today, meaning most homeowners can’t deduct their mortgage insurance at all.

Mortgage insurance deduction rules have changed over time, so it’s crucial to understand how, when, and where you can write off private mortgage insurance (PMI), FHA mortgage insurance premiums (MIP), or VA funding fees.

What You’ll Learn 📚:

• 🏠 All Mortgage Insurance Types: The ins and outs of PMI for conventional loans, FHA MIP, and VA funding fees – and how each one’s deductibility differs.

• 📜 History & Current Rules: Why Congress made mortgage insurance premiums deductible (temporarily), how the tax law changed from pre-2021 through 2022 extenders, and the current status as of 2025.

• 💡 Itemizing vs. Standard Deduction: How the requirement to itemize deductions affects your ability to deduct mortgage insurance, and why most taxpayers’ standard deduction means they can’t claim this write-off.

• 🔎 Expert Tips & Pitfalls: Common mistakes to avoid (like confusing homeowners insurance with PMI, or missing income phase-outs), plus detailed examples of how to correctly deduct mortgage insurance on Schedule A.

• 💰 Maximize Savings (When Allowed): Pros and cons of deducting mortgage insurance, comparisons of different scenarios (PMI vs. MIP vs. VA fees), and how key entities (IRS, HUD, VA, lenders) factor into the process.

✅ The Direct Answer: When Can You Deduct Mortgage Insurance?

Mortgage insurance is only deductible in specific situations: You must itemize your deductions on your federal tax return (Schedule A) and satisfy certain IRS criteria. Here’s the quick rundown of key requirements for deducting mortgage insurance premiums:

• You Itemize Deductions: The mortgage insurance premium deduction is an itemized deduction. If you take the standard deduction, you cannot deduct PMI, MIP, or VA fees. In practical terms, only about 10% of taxpayers itemize post-2018, so the deduction is out of reach for most people who use the larger standard deduction.

• Income Limits Apply: There’s a strict income phase-out. If your adjusted gross income (AGI) is up to $100,000 (or $50,000 if married filing separately), you qualify for the full deduction. Above that, the deduction amount was reduced by 10% for each $1,000 over the threshold. It phased out completely at $109,000 AGI ($54,500 for married filing separately). In short: higher-income taxpayers can’t benefit.

• Qualified Mortgage & Home: The insurance must be connected to a qualified residence (your primary home or a second home) and to acquisition debt. In simple terms, the mortgage insurance has to be for a loan used to buy, build, or substantially improve your home.

  • If you have PMI on a mortgage that isn’t acquisition debt (for example, a portion of a cash-out refinance used for other purposes), that part wouldn’t be deductible. The loan must be secured by your home, and the insurance contract issued after 2006.

• Eligible Types of Insurance: Not all “mortgage insurance” is created equal. The tax law (when in effect) covered private mortgage insurance (PMI) provided by private insurers, FHA mortgage insurance premiums (MIP) for FHA-backed loans, VA funding fees for VA loans, and even USDA loan guarantee fees. Other types of insurance—like homeowner’s hazard insurance or mortgage life/disability insurance—are never deductible as mortgage interest. Only the insurance that compensates lenders if you default (PMI/MIP/VA/USDA fees) potentially qualifies.

• When the Deduction Is Allowed: Tax years matter. This deduction has expired and been revived multiple times. It originally started in 2007 as a temporary provision. Most recently, it was allowed for tax years 2018 through 2021 (thanks to Congress extending it).

  • As of 2022 and beyond, federal law has let it expire. That means for your 2022, 2023, 2024 (and currently 2025) tax returns, you cannot deduct mortgage insurance premiums under current rules. (There’s always a chance Congress could retroactively extend it again, but as of now it’s not in effect.)

Where to deduct it: If you meet all the above, you would deduct mortgage insurance on Schedule A (Form 1040), which is the form for itemized deductions. In the years it was allowed, there was a specific line for “Mortgage insurance premiums” (for example, Line 8d on the 2020 Schedule A).

You enter the amount of premiums you paid in that tax year, and it gets added to your other itemized deductions like mortgage interest and property taxes. This reduces your taxable income just like mortgage interest does. Remember, though, you only benefit if your total itemized deductions exceed the standard deduction for your filing status.

The deduction for mortgage insurance is only available if you itemize and meet the IRS’s income and qualified loan criteria. It doesn’t matter if it’s PMI on a conventional loan, FHA MIP, or a VA funding fee – the same basic rules apply. Now, let’s break down each type of mortgage insurance and the detailed rules and nuances for deducting them.

🏠 Mortgage Insurance Types Explained: PMI vs. FHA MIP vs. VA Funding Fee

Mortgage insurance comes in a few flavors depending on your loan type. It’s important to understand these, because the how and when of deducting them can vary slightly. All of them serve the same purpose: protecting lenders (or the government) in case you default, usually because you made a small down payment. Here are the main types:

Private Mortgage Insurance (PMI) – Conventional Loan Coverage

What it is: Private mortgage insurance is typically required on conventional mortgages (those not insured by a government agency) when the borrower puts down less than 20%. Lenders mandate PMI for high loan-to-value (LTV) loans to hedge the risk of default. PMI is provided by private insurance companies (think MGIC, Radian, etc.) and is usually paid as a monthly premium added to your mortgage payment.

When it’s paid: PMI premiums are usually paid monthly along with your mortgage, though some loans allow an upfront single premium or a combo of upfront + monthly. For most homeowners, PMI will automatically cancel once you’ve paid down your loan to 78% LTV, or you can request cancellation at 80% LTV per the Homeowners Protection Act. So PMI might not last for the entire loan term if you build equity.

Deductibility: When the tax law allowed the deduction (through 2021), PMI premiums paid on a qualified mortgage were deductible if you itemized and met the AGI limits.

If you prepaid PMI in a lump sum for multiple years of coverage (not common, but some people do a single premium PMI), the IRS required that you amortize (spread out) that payment over either 84 months (7 years) or the life of the loan, whichever was shorter.

This means you couldn’t deduct it all at once; you’d deduct a portion each year. (For example, if you paid $5,000 upfront PMI to cover the first 5 years of the loan, you’d deduct roughly $1,000 per year for five years, subject to the income phase-out.) Regular monthly PMI didn’t require this calculation since you pay as you go for each month.

Where to deduct: On Schedule A under “Mortgage Insurance Premiums” (when applicable). Your mortgage lender or servicer will typically report the total PMI you paid for the year on Form 1098 (Mortgage Interest Statement) in a designated box, if it was $600 or more. That number is what you’d use on your tax return.

FHA Mortgage Insurance Premiums (MIP) – Government-Backed Loans

What it is: An FHA loan is a mortgage insured by the Federal Housing Administration (part of HUD). FHA loans enable buyers with smaller down payments or lower credit to get financing, but they come with mandatory mortgage insurance premiums (MIP). There are two components:

• Upfront MIP: a one-time premium (currently 1.75% of the loan amount) paid at closing. Borrowers typically finance this into the loan balance.

• Annual MIP: an ongoing insurance fee calculated each year (anywhere from 0.15% to 0.75% of the loan balance per year, depending on factors like your down payment and loan term). Despite the name “annual,” it’s usually paid monthly as part of your mortgage payment.

When it’s paid: The upfront MIP is paid once (but if you refinance into another FHA loan, you might pay a new upfront premium). The annual MIP is paid in installments each month. For loans with low down payments, FHA’s annual MIP now lasts for either 11 years or the life of the loan, so many FHA borrowers pay MIP for a long time unless they refinance out of the FHA loan.

Deductibility: When allowed by law, FHA annual MIP payments were deductible just like PMI, subject to the same AGI phase-out and itemizing requirement. Upfront MIP could also be deducted, but with a twist: if you financed the upfront premium into your loan, you are still considered to have “paid” it (borrowed money that immediately paid the premium). The IRS required that upfront premiums be allocated over 84 months (7 years) or the loan term, similar to prepaid PMI.

For example, say you bought a house with an FHA loan in 2019 and your upfront MIP was $4,200. You’d typically deduct $50 per month ($4,200/84) for each month you owned the loan that year – so $600 for the first full year, again subject to phase-out if your AGI was over $100k. If you sold or refinanced before the 84 months, you couldn’t deduct the remaining balance. (This rule prevented taking the entire upfront deduction at once.)

Where to deduct: Same place – Schedule A, “Mortgage Insurance Premiums.” FHA MIP (both upfront and annual) should also show up on Form 1098 from your lender. Often, the annual MIP total is reported there, and if you paid the upfront out-of-pocket, that might be listed too. If financed, you’d need to know the amount from your closing documents to calculate the deductible portion.

VA Funding Fee – VA Loan Guarantee Fee

What it is: A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans and service members. VA loans don’t charge monthly mortgage insurance in the way conventional or FHA loans do. Instead, the VA charges a funding fee – a one-time fee at loan origination (between 1.25% and 3.3% of the loan, depending on down payment and whether it’s your first VA loan). This fee helps fund the VA loan program (essentially, it’s like paying your insurance premium up front). Some borrowers (for instance, those with VA disability ratings) are exempt from the fee.

When it’s paid: The VA funding fee is usually paid at closing. Borrowers often finance the fee by adding it to the loan amount rather than paying out of pocket, but either way it’s considered paid to the VA at closing.

Deductibility: The VA funding fee has been treated as equivalent to a mortgage insurance premium for tax purposes. When the deduction was in effect, the funding fee was fully deductible in the year paid (no need to spread it out) as long as you met the itemizing and income requirements.

The tax code specifically included VA (and USDA) fees as “qualified mortgage insurance.” Interestingly, IRS guidelines did not require amortizing the VA funding fee over 84 months – likely because it’s a one-time charge that isn’t technically a prepayment of future annual premiums the way an upfront MIP is. So if you paid a $5,000 VA funding fee on a home purchase in 2020, you could deduct the entire $5,000 on your 2020 Schedule A (again, only if your AGI wasn’t too high and you itemized). This made VA loans quite favorable – a veteran homebuyer could potentially write off that big chunk in the first year.

Where to deduct: Schedule A as well. The VA funding fee might not be listed on your Form 1098 because it’s typically paid to the VA through the title closing process, not your lender. However, tax software and IRS instructions advised to include it in the total mortgage insurance premiums deduction. You’d use your closing disclosure paperwork to find the amount. TurboTax and other programs often had you enter it as a lump-sum PMI/MIP amount.

USDA Guarantee Fee – (Honorable Mention)

What it is: A USDA loan (for rural homebuyers) also has a one-time guarantee fee (about 1% of the loan) and an annual fee (about 0.35% annually). This operates much like the VA’s structure: no monthly PMI, but these guarantee fees go to the USDA’s Rural Housing Service.

Deductibility: The USDA upfront and annual fees were similarly deductible as mortgage insurance when the law was active. Upfront USDA fees, like VA, were not required to be spread out by the IRS (the law explicitly carved out VA and USDA from the amortization rule). Annual USDA fees (paid monthly) worked like PMI/MIP for deduction purposes.

Bottom line: PMI, FHA MIP, VA funding fees, and USDA fees all fell under the “mortgage insurance premiums” deduction umbrella. The differences were mainly in how they’re paid and any allocation rules. When allowed, all could be written off if you qualified. Now, let’s see how these play out in real-life scenarios and how the deduction has changed over time.

📊 Comparing Deduction Scenarios for Different Loans

To make this more concrete, here’s a quick comparison of three common scenarios and how mortgage insurance deductions work(ed) for each:

Note: In all scenarios above, remember you only realize a tax savings if your total itemized deductions exceed your standard deduction. Also, if any of these loans were in years the provision expired (e.g., a VA loan in 2022), the mortgage insurance amounts wouldn’t be deductible at all on your federal return under current law.

Now that we’ve illustrated the mechanics for different loan types, let’s delve into the legislative history that led to these rules and where things stand today.

📜 Tax Law Timeline: Past, Present, and Future of the Mortgage Insurance Deduction

The ability to deduct mortgage insurance premiums has a rollercoaster history, tied closely to periodic acts of Congress. To truly grasp when and why you can deduct PMI or MIP, it helps to see how the law evolved:

• 2007 – The Beginning: Mortgage insurance premiums first became deductible in tax year 2007. Prior to that, PMI was not tax-deductible at all (unlike regular mortgage interest). The change came via the Tax Relief and Health Care Act of 2006, which added PMI/MIP as deductible qualified residence interest for the first time.

  • Congress was responding to a softening housing market and aimed to encourage home buying by reducing the cost of borrowing for those who couldn’t put 20% down. Initially, it was a temporary one-year provision (for 2007 premiums only), with the same income phase-out at $100k/$109k AGI.

• 2008-2011 – Short Extensions: Over the next few years, Congress extended the deduction in fits and starts. The Mortgage Forgiveness Debt Relief Act of 2007 extended it through 2010. Then another late law extended it through 2011. Each time, it was usually tacked onto larger bills and often decided at the last minute. The deduction kept the same rules (itemize, income limits, etc.) throughout.

• 2012-2016 – Lapse and Revival: The deduction actually expired for a bit. It wasn’t in effect for 2012 and 2013 at first. But Congress retroactively reinstated it: the American Taxpayer Relief Act of 2012 (passed in Jan 2013) extended it through 2013.

  • Then the Tax Increase Prevention Act of 2014 extended it for 2014. And the Protecting Americans from Tax Hikes (PATH) Act of 2015 extended it again for 2015 and 2016. Notice a pattern? It was never permanent – lawmakers kept doing one or two-year extensions as part of tax extender packages. By the end of 2016, it was set to expire again.

• 2017 – Brief Hiatus: The deduction actually lapsed for 2017 initially. That means when people filed 2017 tax returns in early 2018, PMI wasn’t deductible under the law as originally written. However, Congress stepped in retroactively:

  • the Bipartisan Budget Act of 2018 (signed in February 2018) brought it back for 2017. So taxpayers who paid PMI in 2017 got relief, but many only found out after filing – requiring amended returns in some cases to claim it. This retroactive habit made it quite confusing for taxpayers.

• 2018-2020 – TCJA and Another Extension: The big tax reform, the Tax Cuts and Jobs Act (TCJA) of 2017, passed in December 2017, did not make the PMI deduction permanent. In fact, TCJA largely ignored it (focusing on other areas like doubling the standard deduction and capping state tax deductions). So once again, PMI/MIP deduction was technically expired for 2018. But late in 2019, Congress acted: the Further Consolidated Appropriations Act, 2020 (signed in Dec 2019) retroactively extended the mortgage insurance deduction for 2018, 2019, and through 2020. This meant:

  • People could amend 2018 and 2019 returns to claim it if they had PMI and itemized.

  • It was in place for 2020 returns normally.

  This was a significant move because it spanned multiple years and also explicitly included VA and USDA fees in the definition of deductible premiums.

• 2021 – One More Year: That same late-2019 law also included 2021 in the extension (it essentially said premiums paid through Dec 31, 2021 are deductible). So, the deduction remained available for tax year 2021. By now, millions of taxpayers had used it each year when itemizing (especially in years before TCJA when more people itemized). However, the benefit was still mostly for middle-income homeowners, since higher earners phased out.

• 2022 – Expiration: The provision expired at the end of 2021. Congress did not extend it for 2022 in time. So when filing 2022 taxes (in early 2023), taxpayers could no longer deduct mortgage insurance premiums. The IRS removed the line from Schedule A and issued guidance that the deduction was expired. Many tax software FAQs in 2022-2023 had to remind people that PMI isn’t deductible for that year. Essentially, as of tax year 2022, federal law provides zero deduction for these premiums, unless and until Congress renews it.

• 2022 Extenders? There was hope late in 2022 that an omnibus bill might extend the deduction again (covering 2022 and beyond), but it didn’t happen. Lawmakers occasionally introduced bills to make the deduction permanent – for example, the Mortgage Insurance Tax Deduction Act gets proposed in Congress (one was H.R. 539 last session, and in early 2025, another bill H.R. 918 was introduced to make it permanent). Despite bipartisan support from some housing advocates, no extension has passed for 2022 or later as of now.

• 2025 and Beyond: As of 2025, the mortgage insurance premium deduction is not available. However, keep an eye on Congress. It’s possible it could be retroactively restored for 2023 or 2024 (Congress has done stranger things!).

  • Also, note that many other TCJA provisions expire after 2025, so there could be a larger tax law change where this deduction’s fate is decided. Housing industry groups (like USMI – U.S. Mortgage Insurers) have lobbied to make the deduction permanent, citing that it helps first-time and low-to-moderate income buyers. If future legislation reinstates it, the rules would likely mirror the previous ones (itemize, income cap, etc.) unless they specifically change the limits.

Current Status (2025): When doing your taxes, assume no deduction for PMI/MIP for now. If you’re preparing returns for 2024 or 2023, you won’t see a line for it. The last tax year you could claim it was 2021. If you forgot to claim it for 2019, 2020, or 2021 and you were eligible, you can still file an amended return (generally within 3 years of the filing date) to get that deduction back. For example, you have until around April 2025 to amend 2021 returns due to the statute of limitations.

In short, Congress has treated mortgage insurance write-offs as a temporary perk that comes and goes. Always double-check the latest tax year’s rules – just because you deducted it in one year doesn’t mean it’s allowed the next.

🧮 Itemized vs. Standard Deduction: The Impact on Your Mortgage Insurance Write-Off

A critical aspect of “how, when, and where” to deduct mortgage insurance is understanding itemized deductions versus the standard deduction. This has become even more important after 2018, because the standard deduction increased significantly and many fewer people itemize now.

Itemized Deduction Basics: When you itemize, you are listing out deductible expenses (on Schedule A) like mortgage interest, property taxes, charitable contributions, state income taxes, medical expenses (over a threshold), and – in the years it’s allowed – mortgage insurance premiums. The total of those itemized expenses then replaces your standard deduction. You would itemize only if your itemized total is larger than the standard deduction (or if you have to itemize for some reason like married filing separately and your spouse itemizes).

Standard Deduction Basics: The standard deduction is a fixed amount you can deduct regardless of expenses. For example, in 2025 the standard deduction for a single filer is around $13,850 (and for married filing jointly around $27,700, with adjustments for inflation each year). It’s quite high – roughly doubled by the TCJA in 2018 – which is why only ~10% or so of taxpayers currently itemize.

Why it matters for PMI: Mortgage insurance premiums are only deductible if you itemize. They do not count toward any above-the-line deduction or credit. So if your itemizable expenses aren’t above that standard deduction threshold, you effectively get no benefit from PMI even in a year it’s deductible.

Example: Let’s say in 2021 you paid $1,000 in PMI, $6,000 in mortgage interest, $4,000 in state/local taxes, and $1,000 in charitable donations. Your total itemized would be $12,000. But the standard deduction for a married couple that year was $25,100. In that case, you’d just take the standard deduction of $25,100 because it’s larger – meaning none of your itemized expenses (including PMI) actually reduce your tax, because you didn’t itemize. Conclusion: The PMI deduction only helps if you have enough other deductions (or a very large amount of PMI plus other items) to exceed the standard amount.

Bunching strategy: Some taxpayers near the cusp try to “bunch” deductions in one year (e.g. prepaying property taxes or making two years’ worth of charitable gifts in one year) to allow itemizing that year, then take standard next year.

PMI is typically paid monthly so it’s hard to bunch, but if you have control (for instance, if you were close to 20% equity, you might try to prepay some mortgage to cancel PMI earlier in the year, thus reducing PMI amount overall – though that actually reduces the deduction amount, so probably not a common strategy). Generally, PMI itself is not large enough to push someone over the standard deduction by itself; it’s usually the combination with mortgage interest and property taxes that does it, especially for new homeowners with large loans.

Beware of SALT cap: One reason itemizing dropped after 2018 is the new $10,000 cap on state and local taxes (SALT). This means even if you pay $15k in property and state income taxes, you can only claim $10k. This cap hurt many itemizers. Mortgage insurance deduction wasn’t capped in that way, but its usefulness often depended on SALT and interest to stack up enough deductions. If you’re in a high-tax state, even if you have PMI, you might find the SALT cap limiting your itemized total.

Takeaway: If you are not itemizing, don’t bother looking for where to deduct PMI on your 1040 – it won’t be there. On the flip side, if Congress reinstates the deduction in the future and you do have sizable deductions, adding your PMI could save you some money. Always compare your itemized total versus standard deduction for your filing status each year.

To see the benefit clearly, let’s outline pros and cons of deducting mortgage insurance when it’s available:

As you can see, there are solid reasons to take the deduction when it’s available, but also significant limitations. Next, let’s cover some common mistakes and misconceptions taxpayers have around mortgage insurance and taxes, so you can avoid them.

🚩 Common Mistakes to Avoid with Mortgage Insurance Deductions

Even savvy taxpayers can slip up when it comes to deducting mortgage insurance. Here are some frequent mistakes and myths – make sure you’re not falling victim to any of these:

• Mixing Up Homeowner’s Insurance with Mortgage Insurance: This is a big one. Homeowner’s insurance (hazard insurance on your property) is NOT deductible on a personal tax return. Some people hear “mortgage insurance premiums are deductible” and think it means their regular home insurance or even mortgage payment protection insurance qualifies – it doesn’t. Only the specific types of insurance we discussed (PMI, MIP, VA/USDA fees) that secure the lender’s risk are potentially deductible. Always separate these in your mind.

• Not Itemizing but Trying to Claim PMI: Many filers simply enter info into tax software and assume all their mortgage-related costs will give a benefit. They might dutifully input their PMI from Form 1098, but if they don’t have enough deductions to itemize, it won’t actually count. A common mistake is thinking you got a deduction for PMI when in reality you took the standard deduction and saw no change. Always check if you’re itemizing; if not, the PMI entry is ignored. (Tip: If using software, it usually tells you which method it chose – standard or itemized. Don’t assume that just because you entered PMI, you got a tax break.)

• Forgetting the Income Phase-Out Calculation: If your AGI is above $100,000 ($50k MFS), you can’t deduct the full amount of premiums – and above $109k, none at all. A mistake some make is to claim the full PMI they paid without applying the phase-out.

  • The IRS instructions require a worksheet to reduce the deduction. For example, if AGI = $105,000 (which is $5,000 over the $100k threshold), you should only deduct 50% of your PMI (because it’s reduced 10% per $1,000 over). If you forget, you’ll overstate your deduction. Tax software usually does this automatically if you input correctly, but if doing by hand, be cautious. Married filing separately filers often overlook that their phase-out starts at just $50k AGI.

• Deducting in Disallowed Years: It’s easy to be out-of-sync with Congress’s extensions. Some people continued deducting mortgage insurance in 2014 or 2017 not realizing the law had lapsed in those years (until retroactively fixed later). Or someone might try to deduct it on their 2022 return because they deducted in 2021. Always verify for the tax year in question. For 2022 and onward (as of now), any amount you paid for PMI/MIP should be left off your Schedule A. If you claim it when it’s not allowed, the IRS could disallow it and adjust your return, potentially triggering penalties or a smaller refund than expected.

• Not Amending Past Returns When Extensions Passed: Conversely, a mistake is missing out on money because you didn’t update a return. For instance, Congress retroactively allowed the deduction for 2018 and 2019, but many who didn’t itemize originally (or didn’t include PMI) never went back to amend and get an additional refund. If you had significant PMI those years and could benefit, you had a window to amend (now closed for 2018-2019 due to statute of limitations). Keep alert: if Congress revives the deduction for 2022 or 2023 after you’ve filed, you might need to file an amended return to claim a refund.

• Incorrectly Allocating Prepaid Premiums: If you paid an upfront FHA premium or a single-premium PMI, the rules about spreading the deduction can trip you up. A mistake is deducting the whole lump sum in the year paid. The IRS expects you to prorate it (unless it’s VA/USDA). If you don’t, and you get audited, they could disallow the excess portion. Make sure to follow the allocation rule: divide the lump sum by 84 (or by the loan term months if shorter) and only deduct that part for each year. The rest carries forward (assuming the law is still in effect in subsequent years).

• State Tax Misalignment: If you live in a state like California that disallows the mortgage insurance deduction for state income tax, you need to adjust for that. A common error is taking the same itemized amount on the state return.

  • California, for example, requires you to subtract any PMI deduction you took federally when figuring your California itemized deductions. On the flip side, in states that piggyback off your federal taxable income, if the feds disallowed PMI but your state didn’t update its conformity, you might actually be able to claim it on the state return. This gets wonky – but the mistake is not checking your state’s rules. Generally, most states followed the federal expiration, but always confirm.

• Assuming Deductible = “Refundable”: Some folks misunderstand how a deduction works. Deducting $1,000 of PMI does not mean you get $1,000 back. It means your taxable income is $1,000 lower. The actual cash benefit is $1,000 * times your marginal tax rate. So maybe $220 back if you’re in the 22% bracket. It’s a subtle point, but don’t think paying a lot of PMI will net you a dollar-for-dollar refund.

Avoiding these mistakes will ensure that if and when you deduct mortgage insurance, you do it correctly and maximize your allowed benefit.

💡 Detailed Examples: How Deducting Mortgage Insurance Works in Practice

To cement your understanding, let’s walk through a few detailed scenarios. These examples illustrate different circumstances and how the mortgage insurance deduction would apply (or not apply):

Example 1: New Homebuyers with PMI (Itemizing)
Jack and Diane bought their first home in 2021 with a conventional loan. They put down 10% on a $300,000 house, so they have PMI. In 2021, they paid $1,500 in PMI premiums. They also paid $8,000 in mortgage interest and $5,000 in property taxes in that partial year. Their AGI is $90,000.

• Can they deduct it? Yes, 2021 was an eligible year, and their AGI is below $100k, so no phase-out. They also have enough deductions to itemize: their PMI + interest + taxes + some charity donations totaled about $15,000, which is higher than the 2021 standard deduction ($12,550 for single, but they are married filing jointly so $25,100).

  • Actually, as a married couple, $15k wasn’t above $25,100 standard – so wait, do they itemize? In this case, even with PMI, their itemized total ($1,500 + $8,000 + $5,000 = $14,500, plus any charity) did not exceed $25,100, so they would likely still take the standard deduction and not itemize in 2021. That means ironically the PMI didn’t help them that year. However, suppose they had other deductible costs or it was a single filer scenario; the key point is they met all criteria except the itemizing threshold.

• Let’s tweak: If Jack and Diane had $12,000 of state taxes (subject to the $10k SALT cap) and $2,000 charitable gifts, then their itemized would be PMI $1,500 + interest $8,000 + taxes $10,000 (capped) + charity $2,000 = $21,500. Still under $25,100 – so they still wouldn’t itemize. It takes a lot! If they had a bigger loan with $15,000 interest, then itemized would be ~$28,500 and they would itemize, including the $1,500 PMI. In that case, the $1,500 PMI deduction at 22% tax rate saves them about $330 in federal tax.

• Where do they deduct? On Schedule A of their 2021 Form 1040, they would enter $1,500 on the line for mortgage insurance premiums. They got this number from their Form 1098 provided by their lender. Everything is straightforward since their income is under the limit.

Example 2: Higher-Income Homeowner with Phase-Out
Sarah is a single homeowner with an FHA loan. Her AGI is $107,000 in 2020. She paid $2,400 in annual MIP to FHA in 2020 (plus she had an upfront MIP, but let’s focus on the annual). She also paid $6,500 in mortgage interest and some state taxes and charity that bring her itemized deductions to above the standard deduction.

• Can she deduct it? 2020 is eligible. But her AGI is $107k, which is $7,000 above $100k. The phase-out is 10% for each $1,000 over. $7,000 over means a 70% reduction. That means she can only deduct 30% of her $2,400 MIP. 30% of $2,400 = $720. So instead of writing off $2,400, she can only write off $720 on Schedule A. The other $1,680 is lost due to the phase-out. If her AGI had been $109,000, that’s $9,000 over – 90% reduction – she’d deduct only $240. At $110k AGI, she’s over $10k above, so deduction is fully zero.

• She enters $2,400 paid on the worksheet or software, which calculates allowed $720 deduction. She still itemizes because even without full PMI, her itemized total (including that $720 effectively) is enough to beat standard. The tax saving on that $720 (if she’s in 24% bracket) is about $173. Not huge, but something. If her AGI was a bit lower, she’d get more.

• Lesson: The phase-out dramatically scaled down the benefit for higher earners. Sarah might not realize her $2,400 expense only yielded $720 deduction unless she looks closely. The software likely showed a “limited by income” note.

Example 3: VA Loan in 2022 (No Deduction)
John, a veteran, bought a home in 2022 with a VA loan. He paid a funding fee of $6,000 (financed into his loan). He also pays property taxes and interest and usually itemizes. His AGI is $80,000.

• Can he deduct it? Unfortunately for John, no – the mortgage insurance deduction provision expired at end of 2021. So even though in prior years that $6,000 would have been a fantastic deduction, for his 2022 taxes it is not allowed.

  • He might be confused because perhaps a buddy who bought in 2021 told him he deducted his VA fee. But unless Congress retroactively changes the law, John gets no federal deduction for it. (He should check state rules; for instance, if John lives in a state that still allowed it, maybe he can claim it on the state return, but most likely not.)

• If John uses tax prep software, when he enters the $6,000 funding fee, it might not even have a place to enter it for 2022, or if it does, it won’t carry to any deduction because the field is inactive for that year. Essentially, it’s treated like personal interest – nondeductible.

• This example highlights timing luck: a veteran who closed on Dec 31, 2021, could deduct their funding fee on 2021 taxes; another who closed Jan 1, 2022, could not.

Example 4: Refinancing and Prepaid PMI
Linda bought a house in 2015 with a 5% down conventional loan and paid monthly PMI. She refinanced in 2020 into a new conventional loan (still over 80% LTV, unfortunately) but chose to pay a single upfront PMI premium of $3,000 rather than monthly premiums on the new loan. Her new loan term is 30 years (360 months).

• Deduction handling: Since 2020 was an eligible year, Linda can deduct the upfront PMI, but she can’t take all $3,000 at once because that premium technically covers multiple years of insurance (it’s meant to cover the loan until a certain equity level, often life of loan). IRS rules say allocate over 84 months. So she gets $3,000/84 ≈ $35.7 per month.

  • If she refinanced in June 2020, she had 7 months in 2020 with that new loan, so she can deduct about $250 for 2020 (7 * $35.7). In 2021 (12 months), she could deduct about $428 of it. However, because the law expired after 2021, she cannot deduct the remaining prepaid PMI in 2022 or beyond, even though normally she’d continue amortizing it for up to 84 months. There was even a clause in the tax law that said no deduction for amounts allocated to periods after the deduction’s expiration. So she loses out on the rest unless a future extension reinstates it.

• If Linda’s AGI is, say, $95k, she gets the full $250 in 2020 and $428 in 2021 as additional itemized deductions (assuming she itemizes). If her AGI were over $100k, those numbers would be reduced accordingly by the phase-out percentage.

• Refi nuance: If you refinance and pay new PMI or MIP, each new loan’s upfront premium starts its own 84-month clock for allocation. If a loan is paid off early (refinanced or sold), any remaining un-deducted prepaid premium is just forfeited – you can’t deduct it all upon loan payoff.

These examples show how context (year, income, itemizing status, payment structure) can drastically change the outcome. Always apply the current law’s rules to your personal scenario.

🗝️ Key Terms & Entities (Glossary) and How They Relate

To navigate mortgage insurance deductions like an expert, you should be familiar with these key terms and entities and understand their relationships in the tax context:

• Internal Revenue Service (IRS): The U.S. tax authority that administers tax laws. The IRS provides guidance (like Publication 936: Home Mortgage Interest Deduction) on how to deduct mortgage insurance and publishes forms (Schedule A, Form 1098). The IRS doesn’t make the law (Congress does), but it enforces it. For example, when the law allowed PMI deductions, the IRS created a line on Schedule A and instructed mortgage companies to report premiums on Form 1098.

• Congress: The legislative body that writes tax laws (Internal Revenue Code). Congress decides if mortgage insurance premiums are deductible and for which years. Through various acts (as we saw: PATH Act, budget bills, etc.), Congress has turned the deduction on and off. Congress also sets the income phase-out thresholds and could amend those (notably, they never updated the $100k threshold since 2007, which over time meant fewer middle-class folks got phased out).

• Qualified Residence: A term in tax law meaning your primary home or one other home (like a vacation home) that you own and could claim mortgage interest on. Mortgage insurance premiums are only deductible for loans on a qualified residence. If you have an investment property, that’s not a qualified residence for this deduction (though see below on rentals). The relationship here: the home securing the mortgage must be a qualified residence for you – typically the same homes you’d claim mortgage interest on.

• Acquisition Indebtedness: This is a fancy way to say a mortgage used to acquire, build, or improve a qualified residence. Why it matters: The mortgage insurance premium must be for acquisition debt to be deductible. If you took out a mortgage for another reason (like pulling equity to pay off credit cards), that portion of the loan isn’t acquisition debt, and technically the PMI on that portion wouldn’t qualify. In practice, if your loan is partly acquisition, partly not, you’d prorate. (Most people in PMI situations are dealing with purchase loans or qualifying refinance loans, so it’s usually fully acquisition debt.)

• Private Mortgage Insurance (PMI): Bold because this is a main term – PMI is the insurance from a private insurer required on conventional loans >80% LTV. Entities involved: private insurance companies provide it, lenders/servicers collect the premiums as part of the mortgage payment, and borrowers pay for it. For taxes, PMI is reported by the lender/servicer on Form 1098 to the borrower and IRS (the lender is the one facilitating the payment, even though it goes to the insurer, so the lender does the tax reporting).

• Federal Housing Administration (FHA): An agency of HUD (Department of Housing and Urban Development) that insures mortgages. FHA is the entity behind MIP (Mortgage Insurance Premiums). Borrowers pay MIP to HUD/FHA (via their lenders) and FHA provides insurance to the lender. On taxes, FHA MIP is treated the same as PMI; your lender reports it on 1098 if applicable. HUD as the broader department oversees FHA’s programs.

• Department of Veterans Affairs (VA): The government department that guarantees VA loans. The VA funding fee is paid to the VA (often via your closing agent/lender). The VA doesn’t send you a tax form, but the payment is documented in your closing paperwork. The VA’s role is more on the loan side, but for deduction purposes, Congress included VA fees under the definition of deductible mortgage insurance. VA loans also often have no monthly premium, just the one-time fee.

• USDA (Rural Housing Service): Similar role for USDA-guaranteed loans. The USDA guarantee fee (upfront and annual) functions like FHA/VA fees. USDA is part of the equation though not mentioned by the user explicitly, but it’s another entity if discussing comprehensiveness.

• Loan Servicer / Lender: The company you make your mortgage payments to. They are the ones who actually handle collecting PMI or MIP along with your mortgage. They typically are required by law to issue you a Form 1098 after year-end if you pay $600+ in mortgage interest or insurance. So the lender/servicer is an intermediary between you, the insurance entity (private insurer or FHA/VA), and the IRS. The lender’s reporting and your deduction must match up; if you claim $5,000 PMI and the 1098 said $3,000, it might flag an issue.

• Form 1098 (Mortgage Interest Statement): A tax form lenders send to borrowers each January showing how much mortgage interest, points, and mortgage insurance premiums were paid in the prior year. There is a specific box on the 1098 for “Mortgage Insurance Premiums.” The existence of an amount in that box is a big hint that those premiums might be deductible for that year – but as we know, after 2021 the box might be blank or zeroed out on the form (lenders might still report for state or recordkeeping even if federal deduction expired). Always refer to this form and include the reported amount (adjusted for any amortization rules, if needed) on Schedule A if eligible.

• Adjusted Gross Income (AGI): This is your gross income minus certain adjustments (like retirement contributions, student loan interest, etc.), found on your tax form above the itemized/standard deduction section. The PMI deduction’s phase-out is based on your household’s AGI. So knowing your AGI is crucial to determine if you get the full deduction, partial, or none. It’s an IRS measure that basically represents your income before itemized deductions.

• Standard Deduction vs. Itemized Deductions: Already discussed, but in terms of key concepts – these are two mutually exclusive ways to claim deductions. “Standard” is fixed, “Itemized” is sum of actual expenses. Mortgage insurance premiums only count in the itemized method. The relationship here is: you choose itemized only if it beats standard. Post-2018, standard got so high that many do not itemize, thus rendering the PMI deduction unusable for them.

• Phase-Out: A term for the gradual reduction of a tax benefit as income increases. For PMI deduction, phase-out runs from $100k to $109k AGI (or $50k to $54.5k MFS), at 10% per $1k. We explained the math earlier. This mechanism is written in the law and IRS formulas handle it. It’s basically a way to target the deduction to middle/lower income homeowners.

• Amended Return: Not a term mentioned yet, but relevant. An amended return (Form 1040-X) is what you file if you need to change a prior year’s return – for example, to claim a deduction that was retroactively allowed or that you missed. The relationship here: when Congress retroactively extended the PMI deduction for 2018-2020, many taxpayers had to file amended returns to get the benefit for 2018 or 2019 if they had not originally claimed it. It’s worth knowing that just because a tax year is over doesn’t mean all is lost; you can amend within 3-year window.

By understanding these terms and entities, you can see the full picture: Congress creates the opportunity for a tax deduction, the IRS sets the rules and forms, your lender/servicer interacts by collecting premiums and issuing Form 1098, and you, the taxpayer, must decide whether to itemize or not based on your AGI and other deductions, to claim the PMI/MIP on your Schedule A. Also, being aware of related agencies like HUD/FHA and VA helps in knowing where the fees originate and why they exist (though for tax purposes they all funnel into the same category of “qualified mortgage insurance premium”).

🔍 Evidence & Analysis: Why the Deduction Exists (and Its Effects)

It’s useful to briefly consider why this deduction was put in place, and what evidence there is of its impact:

• Legislative Rationale: Congress introduced the mortgage insurance premium deduction in 2006 partly to boost the housing market by making low-down-payment loans more affordable. There was recognition that PMI was a significant extra cost for many first-time buyers.

  • By allowing it to be deducted like mortgage interest, Congress effectively classified it as part of the cost of homeownership. Lawmakers have periodically cited fairness: a buyer putting 20% down pays more interest (deductible) and no PMI, whereas a buyer putting 5% down pays less interest but PMI – the deduction evens things out a bit between them.

• Temporary Nature: Despite this rationale, the deduction was not made permanent. One reason is cost – extending it reduces federal revenue (taxes collected) and it’s often been caught up in broader budget negotiations. It’s one of those tax provisions often left to expire and then brought back when convenient (sometimes even retroactively, as seen). The tax-writing committees (House Ways and Means, Senate Finance) have used it as a bargaining chip in negotiations.

• Usage Data: Before TCJA (when more people itemized), a significant number of taxpayers claimed the PMI deduction. For example, in 2014, roughly 4 million taxpayers deducted mortgage insurance premiums, according to IRS data, with an average deduction around $1,500. After 2018, the total number dropped due to fewer itemizing, but those who did itemize and had PMI continued to use it. The benefit predominantly went to middle-income taxpayers (those under the phase-out cap).

• Economic Impact: Housing advocates argue that deductibility of PMI encourages homebuying by effectively subsidizing the mortgage insurance cost. Critics argue the effect is small and that it’s another subsidy for homeowners in a tax code already generous to housing (with the mortgage interest and property tax deductions). Some economists have noted that while helpful, the PMI deduction’s impact is limited by how many people can actually use it. With only ~10% of returns itemizing now, the reach is limited. There’s also evidence that many who could claim it didn’t, due to complexity or lack of awareness (especially during the years it lapsed and returned).

• Comparisons to Other Deductions: The mortgage insurance deduction is often mentioned alongside the mortgage interest deduction because they’re in the same section of tax law (both are “qualified residence interest”). However, unlike mortgage interest which is a long-standing, permanent deduction (albeit with loan limits), PMI has always been temporary. Also, unlike property taxes which got capped, PMI was never capped beyond the income phase-out.

• Fairness Considerations: One piece of analysis: a homeowner with lender-paid PMI (where you accept a higher interest rate instead of paying PMI separately) can deduct the higher interest since it’s just interest – effectively getting around the PMI phase-out and expiration. This has led some to point out the tax code inadvertently favors that route for those who know about it.

  • It’s an advanced tactic: the lender bumps your rate perhaps 0.25% in exchange for covering PMI. The borrower’s monthly payment is similar, but all of it is interest (deductible) rather than partly insurance (which may not be deductible if the law expired or if income too high). This illustrates how tax rules can influence financial products and choices. However, not all lenders offer that, and some borrowers prefer the transparency of paying PMI and dropping it later rather than a permanently higher rate.

• IRS Enforcement: When the deduction is allowed, the IRS has checks in place, mainly the Form 1098 reporting. If you deduct an amount significantly different from what was reported or you forget the phase-out math, it could trigger a correspondence from the IRS. In years it’s disallowed, if someone tries to claim it, the IRS likely will catch it because Schedule A won’t have a line for it or will treat it as an “unallowed deduction” if manually written in. There have been cases where the IRS sent notices recalculating taxes for people who mistakenly left the PMI deduction on their return in a year it expired.

• Future Evidence to Watch: Keep an eye on tax legislation news. If you see a tax extenders bill being discussed in Congress, mortgage insurance premiums are often on the list. Also, organizations like the National Association of Realtors or USMI often publish stats or testimonies about how many constituents benefit from the deduction, to lobby for its renewal. For instance, USMI reported in a press release that nearly 2 million low down payment borrowers got loans with PMI in 2021 – highlighting a potential beneficiary group for the deduction.

In essence, the evidence shows the deduction can save individual homeowners a few hundred dollars a year in taxes, which is meaningful at the household level, though its aggregate cost to the government is relatively modest compared to bigger-ticket deductions. Its on-again, off-again history also serves as evidence that it’s considered a lower priority item in tax policy, revived when convenient.

🔄 Comparisons and Special Cases

Let’s compare some special scenarios and related concepts to fully map out the topic:

• PMI vs. Refinancing or Piggyback Loan: If you really hate paying PMI and counting on a deduction, one could avoid PMI by using an 80-10-10 loan structure (80% first mortgage, 10% second mortgage, 10% down payment). In that case, instead of PMI, you pay interest on the second loan. That interest is deductible as mortgage interest (subject to the $750k overall loan limit) if you itemize.

  • There’s no income phase-out on mortgage interest. However, second mortgage interest is only deductible if the loan was used for acquisition of the home and the combined loans don’t exceed the limit. This approach was popular before the housing crash of 2008; its comeback has been limited, but it’s a way to compare: pay PMI vs. pay a second loan.

  • PMI might be cheaper monthly, but not deductible; second loan interest might be higher cost but deductible. Each homeowner must crunch the numbers. With PMI deduction gone after 2021, the interest on a second mortgage might have a clear tax edge now.

• Mortgage Insurance vs. Mortgage Rate: Similarly, some borrowers opt for lender-paid PMI (LPMI) which results in a slightly higher mortgage interest rate in lieu of separate PMI payments. The trade-off: you often can’t cancel that increased rate, but all your payments are interest which is potentially deductible (and no phase-out specifically on that portion). This was mentioned above as a tax arbitrage. It’s a niche comparison but demonstrates how tax considerations can influence loan choices.

• State Taxes – Deduction vs. Credit: We touched on state nuances. To clarify:

  • States Following Federal: Many states simply use your federal itemized deductions (with some modifications) for state tax. If PMI was deductible federally, it usually flowed through to state itemized deductions. Now that it’s not federal, states that conform to current federal law also don’t allow it.

  • States Decoupled: Some states don’t allow the PMI deduction even if federal did. For instance, California explicitly disallows it – if you itemize in CA, you must subtract any mortgage insurance premiums you deducted federally. This means CA taxpayers got no state benefit even in years 2018-2021 for PMI.

  • States with Credits: States like Wisconsin don’t allow itemized deductions per se, but instead have an itemized deduction credit. In Wisconsin, certain expenses like mortgage interest, property taxes, and charitable contributions (and yes, mortgage insurance premiums when they were allowed federally) can be used to calculate a credit (up to 5% of the amount exceeding a threshold). So Wisconsin effectively gave a small credit for PMI if you qualified. Louisiana had an interesting rule allowing an deduction for the amount your federal itemized exceeded the standard deduction – indirectly, if PMI helped push you above federal standard, Louisiana gave a deduction for that difference (though Louisiana’s mechanics are a bit unique).

  • Bottom line: No state currently gives a specific PMI deduction if federal doesn’t, except through those general mechanisms. Always check your state’s current tax instructions.

• Rental or Business Use: One scenario: what if you have a home you used to live in (where you paid PMI) and you convert it to a rental property? On a rental property, PMI is actually deductible as a business expense on Schedule E (Rental Income) because it’s a cost of financing, similar to interest, with no personal limitation. The catch is, if it was your personal home part of the year and rental part of the year, you’d prorate.

  • But generally, once a property is a full-time rental, PMI or MIP is just another expense against rental income, not subject to the itemized rules or income phase-out (it’s not on Schedule A at all, it’s on Schedule E). This is a bit tangential but worth noting: the limitations we discussed apply to personal use. For business or investment property, different rules (often more favorable in this regard) apply. However, since most people with PMI are owner-occupants (lenders typically require you to occupy if they’re giving you a high LTV loan with PMI), it’s a limited case.

• Mortgage Interest Deduction vs. PMI Deduction: If you have to prioritize or think conceptually, the mortgage interest deduction is usually far larger for most homeowners than the PMI deduction. Interest on a $300k loan could be $10-12k the first year, whereas PMI might be $1-2k. Both require itemizing. Why mention this? Because sometimes people get upset about PMI not being deductible, but it’s useful to remember the bigger tax benefit of homeownership comes from mortgage interest (and property taxes). PMI deduction is like a cherry on top that appears and disappears. Always ensure you’re maximizing the other deductions (interest, points, property taxes within SALT cap) – those are permanent (though interest got its own cap via $750k debt limit).

• Upfront vs. Annual Premium Impact: We already covered how upfront premiums (FHA, VA, USDA, or single-premium PMI) have different deduction timing. A comparison worth reiterating: VA and USDA upfront fees could be taken all at once (when allowed), whereas FHA upfront was spread out. If you happen to have a choice (for example, some conventional loans offer a choice between monthly PMI or a one-time upfront PMI payment), there’s a tax timing consideration: monthly PMI is only deducted in the year paid, but if the law expires, you simply don’t get deduction for months after expiration. An upfront PMI, if paid in a year when allowed, at least gets partially deducted then – but if the law expires, you might lose future portions. There was a risk either way given the on/off nature of the law. From a pure tax perspective, paying monthly was safer in uncertain times because if the law lapses, you stop paying PMI anyway once you refi or hit 80% (so maybe you enjoyed deduction for the years it was there). If you paid a big upfront expecting to deduct it over 7 years and then the law lapses after 2, you miss out on deducting the rest. Of course, tax isn’t the only factor; sometimes upfront PMI gets you a lower rate or lower overall cost.

• Cancellation vs. Deduction: One might wonder, should I just work to cancel PMI ASAP (by reaching 20% equity) or keep it and deduct it? Financially, you almost always come out ahead getting rid of PMI as soon as feasible, because it’s a pure expense with or without a deduction. A deduction might give you back 20-25% of it in tax savings if you’re itemizing, but you’re still out the other 75-80%. It’s not a dollar-for-dollar offset like a credit would be. So aggressively paying down your mortgage to eliminate PMI could save you $1,000 a year, whereas keeping it for a deduction might save you $200 in taxes but cost you $1,000 in premiums. So, from a financial planning perspective, don’t keep PMI just for a partial tax write-off; eliminate it as soon as you reasonably can (refinance or re-appraise if your home value rose, for instance). The deduction is a nice perk when it’s there, but not a reason to prolong paying PMI.

By examining these comparisons and special cases, we’ve essentially mapped the full landscape of mortgage insurance deductibility. It ties into many other financial decisions and tax concepts, which underscores why a semantic, holistic understanding (as per Koray Tuğberk Gübür’s framework) is valuable – the topic is connected to home buying strategy, tax planning, state law differences, and more.

🏛️ State Nuances: Does Any State Allow Mortgage Insurance Deductions?

We’ve mainly focused on federal tax law, as that’s usually the primary concern. However, it’s worth noting any state-level nuances for completeness:

• States with Income Tax: Generally, states either start with federal taxable income or federal itemized deductions, or have their own list of deductible expenses. No state that we know of has a standalone deduction for private mortgage insurance separate from federal treatment. Most states either follow the federal lead or explicitly disallow it.

• California: A key example – California uses its own itemized deduction calculations. California does not allow a deduction for mortgage insurance premiums. So even in 2021, if you deducted PMI federally, you had to add it back for California taxes. California tax forms had instructions to exclude PMI. This means Californians never got a state tax break for PMI, even when it was available federally.

• New York, Illinois, etc.: Many states just take your federal itemized deduction total (or federal taxable income) and then have some adjustments. Since PMI was part of your federal itemized total in years allowed, it would indirectly flow into your state itemized deduction. For 2018-2021, residents of those states who itemized at the state level did benefit from PMI deduction on their state returns as well. Now that it’s gone federally, it’s gone on those state returns too, by default.

• Wisconsin: As mentioned, Wisconsin doesn’t allow itemized deductions but offers a credit equal to 5% of certain itemizable expenses (mortgage insurance was included among those when applicable). So Wisconsinites could get a small credit for PMI in years 2018-2021. If you paid $1,000 PMI, and you met the other criteria, you might get a $50 credit on your WI taxes. Not huge, but something.

• Louisiana: Louisiana allowed an itemized deduction for the amount your federal itemized exceeded the federal standard deduction. In practice, if PMI helped push you over the standard on your federal return, Louisiana let you deduct that overflow. It’s a quirky setup, but effectively Louisiana taxpayers also indirectly benefited from PMI if it made a difference federally.

• States with No Income Tax: Of course, states like Texas, Florida, etc., don’t have income tax, so nothing to deduct or not deduct at the state level.

• States Conforming to Older IRC: A few states “piggyback” on the Internal Revenue Code as of a certain date. If a state’s tax code was fixed to, say, the IRC as of 2019, then it would include the PMI deduction for that year but not beyond. This can lead to odd results. For example, if hypothetically a state’s law still referenced IRC of 2020, it might allow the deduction through 2020 but not for 2021, etc., depending on when they update their conformity. This is pretty technical and varies by state. Most states update conformity annually or have specific provisions to adopt/extinguish extenders.

• Credits for Homebuyers: Some states offer tax credits for first-time homebuyers or other housing-related incentives, but those usually don’t involve mortgage insurance costs. One exception: Maryland used to have something like a credit for mortgage insurance for low-income first-time buyers, but it’s not common.

In summary, no state provides a broad mortgage insurance deduction beyond what federal law did. The majority either followed the federal expiration or, like CA, outright disallowed it even earlier. Always check your state’s tax instructions: if you’re in a state that requires adjustments, ensure you’re adding back any disallowed deductions or taking advantage of any credits if available.

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Finally, let’s wrap up with a quick FAQ to answer some of the most common questions people have on this topic:

❓ FAQ: Quick Yes/No Answers on Mortgage Insurance Tax Deduction

Q: Is private mortgage insurance (PMI) tax-deductible in 2023 or 2024?
A: No. As of tax years 2022 onward, PMI isn’t deductible on federal returns because the tax law provision expired after 2021.

Q: Was the mortgage insurance deduction available in the past?
A: Yes. PMI and other mortgage insurance premiums were deductible for tax years 2007-2011 and 2013-2021 (with some gaps in between that were later filled by retroactive extensions).

Q: Do I need to itemize to deduct mortgage insurance premiums?
A: Yes. You only get a deduction for PMI/MIP if you itemize deductions on Schedule A. You cannot claim it if you’re using the standard deduction.

Q: Are there income limits for deducting PMI?
A: Yes. The deduction phased out for taxpayers with AGI over $100,000 (joint) or $50,000 (separate). It was completely unavailable once AGI exceeded $109,000 (or $54,500 if separate).

Q: Can I deduct the VA funding fee on my taxes?
A: Yes, but only in the years the law allowed it (most recently 2018-2021) and if you itemize and meet the income limits. In eligible years, the full VA funding fee was deductible as mortgage insurance.

Q: What about FHA upfront mortgage insurance – can that be deducted?
A: Yes. In eligible years, upfront MIP was deductible, but it had to be spread over several years (usually 84 months). You could deduct the portion allocated to the current year, subject to the income phase-out.

Q: Is mortgage insurance on a rental property deductible?
A: Yes, but not as an itemized deduction. If you have mortgage insurance on a rental or business property, it’s deducted as a business expense on Schedule E or Schedule C, not on Schedule A, and isn’t subject to the personal income limitations.

Q: Where on my tax return would I deduct mortgage insurance premiums?
A: On Schedule A (Itemized Deductions) under the section for interest paid. In 2021, for example, it was on Line 8d labeled “Mortgage insurance premiums.” (For 2022 and later, this line is removed since it’s not allowed.)

Q: If Congress reinstates the PMI deduction, will I be able to amend my return to get a refund?
A: Yes. If the law is retroactively extended for a year you’ve already filed, you can file an amended return (1040-X) to claim the deduction and receive any additional refund. This typically must be done within 3 years of the original filing.

Q: Does paying PMI affect my taxes in any other way if I can’t deduct it?
A: No. If it’s not deductible, PMI is just a personal expense like utilities or home insurance – it doesn’t get reported on your tax return at all, and it has no tax impact.