Is Private Mortgage Insurance (PMI) Tax Deductible?

Private mortgage insurance may be unavoidable — and it can increase the cost of your loan. But would you feel better about paying PMI if those premiums were tax deductible?

If you put down less than 20 percent when you purchased your home, chances are you’re paying private mortgage insurance (PMI). 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 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 now the case for tax year 2019 and 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 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.

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, the official IRS documents have not yet been updated to reflect this recent change, but of course will be when the 2019 regulations and updates are put in place.

When the deduction was last 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 ($54,400 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 deductions in order to deduct the mortgage interest and PMI premiums they paid now simply take the standard deduction, which simplifies filing returns.

If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please give us a call and we’d be happy to assist you!

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Downtown Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Galena 43021 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington 43147 Polaris Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235

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