Is PMI Insurance Tax Deductible?
Types of PMI
- The tax deduction encompasses more than just privately-backed insurance premiums. The deduction also applies to mortgage insurance payments you make on a Federal Housing Administration mortgage, a Veterans Affairs mortgage or a Rural Housing Service mortgage. These premiums include both those paid monthly and those paid upfront as a funding fee.
- Only mortgages initiated after 2006 are eligible for the PMI tax deduction. Even if you pay PMI that would otherwise qualify, if you took out your mortgage in 2006 or earlier, you cannot claim the deduction. In addition, you can only deduct premiums allocated to a specific year, rather than the year in which you paid them. For example, if you pay your PMI for January 2014 in December 2013, you would deduct those premiums on your 2014 tax return.
Reporting Your Deduction
- The IRS categorizes the PMI tax deduction as an itemized deduction, which requires you to file your income taxes with Form 1040 and list the deduction on Schedule A. The PMI you paid goes on line 13 and is combined with your other itemized deductions. The total, including your PMI tax deduction, gets transferred to line 40 of your Form 1040 tax return and decreases your taxable income.
- When you itemize, you cannot claim the standard deduction. Accordingly, you should consider not itemizing, including taking the deduction for PMI paid during the year, if your itemized deductions do not exceed your standard deduction. However, mortgage interest is also an itemized deduction. If the equity in your home is small enough to require you to pay for PMI, you may be paying enough in mortgage interest to justify itemizing your deductions. See a tax expert for advice on your unique situation.