Private Mortgage Insurance Deduction for Homeowners
Can Mortgage Insurance Can Reduce My Tax Bill?
What Is the PMI Deduction?
Homeowners who pay private mortgage insurance (PMI) are finally getting relief again. Beginning with the 2025 tax year, the IRS has reinstated a valuable deduction for PMI premiums as part of the One Big Beautiful Bill Act (OBBBA). For many families—especially first‑time buyers—this deduction can meaningfully reduce taxable income and help offset rising housing costs.
If you purchased a home with less than 20% down or refinanced into a loan that requires mortgage insurance, this deduction may apply to you. The key is understanding what qualifies, how much you can deduct, and how income limits affect eligibility.
This guide walks you through everything in clear, practical terms.
What Is the PMI Deduction?
The PMI deduction allows eligible homeowners to deduct mortgage insurance premiums as an adjustment to income. This means:
You can claim it even if you take the standard deduction
It directly reduces your taxable income
It applies to PMI, FHA mortgage insurance, VA funding fees, and USDA guarantee fees
It is available for tax years 2025 through 2028
This deduction is designed to support homeowners who needed mortgage insurance to buy or refinance their homes.
Who Can Claim the Deduction?
You may qualify if:
You paid PMI or mortgage insurance premiums in 2025
Your mortgage is secured by your primary residence or second home
Your loan originated after 2006 (most modern loans qualify)
Your income falls within IRS limits
Your lender reports your mortgage insurance on Form 1098
Homeowners most likely to benefit:
First‑time buyers
Borrowers who purchased with less than 20% down
Homeowners who refinanced into a PMI‑required loan
Families with moderate incomes
Buyers in high‑cost markets who needed higher‑LTV financing
If PMI is part of your monthly mortgage payment, this deduction is designed for you.
How Much Can You Deduct?
The IRS allows you to deduct the full amount of mortgage insurance premiums you paid during the year, up to certain income thresholds.
Full deduction available if:
Your Modified AGI is $100,000 or less (Single, HOH, MFS)
Your Modified AGI is $200,000 or less (Married Filing Jointly)
Phaseout range:
The deduction gradually decreases as income rises
It is fully eliminated once income reaches:
$150,000 for Single, HOH, MFS
$300,000 for Married Filing Jointly
Most middle‑income homeowners will qualify for the full deduction.
What Counts as Mortgage Insurance?
The IRS includes several types of premiums:
Private Mortgage Insurance (PMI)
FHA mortgage insurance premiums (MIP)
VA funding fees (amortized over the life of the loan)
USDA guarantee fees
Lender‑paid mortgage insurance (allocated portion)
What does not qualify:
Homeowners insurance
Property taxes
HOA dues
Mortgage interest (deducted separately if itemizing)
Upfront PMI paid by the seller
Mortgage insurance on rental properties
Only insurance tied to the mortgage itself qualifies.
Where Do You Find Your PMI Amount?
Your lender will report deductible mortgage insurance on:
Form 1098, Box 5 (Mortgage Insurance Premiums)
If your lender doesn’t report it, you may still qualify, but documentation is required.
Why This Deduction Matters
For many homeowners, PMI adds $50 to $300 to the monthly mortgage payment. Being able to deduct those premiums can:
Lower your taxable income
Increase your refund
Offset the cost of buying with a low down payment
Make homeownership more affordable for first‑time buyers
Help families in high‑cost housing markets
This deduction is especially valuable for younger households and new homeowners.
How to Calculate Your Deduction
To determine your exact deduction, we must:
Review your Form 1098
Confirm your mortgage insurance qualifies
Verify your income level
Apply the IRS phaseout rules
Ensure the deduction is reported correctly on your return
Even though the concept is simple, the income phaseout rules can be tricky—and many taxpayers miss the deduction entirely because they assume PMI isn’t deductible anymore.
Why You Should Contact Avari Tax Before Filing
Mortgage insurance rules are technical, and lenders don’t always report PMI correctly.
At Avari Tax & Financial Services, we:
Review your mortgage statements and Form 1098
Confirm your PMI qualifies under IRS rules
Apply the correct income thresholds
Maximize your deduction
Ensure your return is accurate and compliant
Explain everything in clear, straightforward language
If PMI is part of your mortgage payment, this deduction can put real money back in your pocket.
Ready to See If You Qualify?
If you paid mortgage insurance in 2025, you may be eligible for a meaningful deduction.
Avari Tax can help you calculate it correctly and ensure you receive every dollar you’re entitled to.
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Private Mortgage Insurance Deduction for Homeowners Can Mortgage Insurance Can Reduce My Tax Bill?
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