Paying PMI? Deduct It From Your Taxes

What you need to know about private mortgage insurance.
hgPG-2023459-HmBuy_taxes_H

hgPG-2023459-HmBuy_taxes_H

Buyers who can't put a 20 percent down payment on their home loan usually get stuck paying costly private mortgage insurance (PMI), which protects lenders if the buyer can't repay the loan.

But if you got a home loan after December 31, 2006, you're eligible to deduct your PMI premium from your taxes. According to the Tax Relief and Health Care Act of 2006, any PMI payments -- often $100 dollars or more per month -- can be deducted as mortgage interest when filling out Schedule A on the federal tax return.  

In order to qualify for the full credit, your adjusted gross income (AGI) cannot exceed $100,000 ($50,000 dollars if married filing separately). The deduction is reduced by 10 percent for every $1,000 dollars of AGI you make over the limit, and disappears altogether at $109,000 ($54,500 if married filing separately). If you are paying a premium for mortgage insurance provided by the Veteran's Administration, Federal Housing Administration or the Rural Housing Administration, it is also deductible.

If you paid PMI premiums in a lump sum when you got your mortgage, you can deduct the portion of the sum you use each year on your tax return. You cannot deduct the entire amount in the first year of your loan.

Unless it is extended, the deduction is available for any mortgages that are originated before January 11, 2011.

Always consult your tax adviser. For more information about deducting mortgage insurance premiums, go to the IRS Web site.

Next Up

Saving Money While Paying for a Home

You may be financially "exhausted" from saving for your home purchase, but now's actually a great time to keep saving.

Protecting Your Home & Finances in Tough Times

4 steps to take to weather a recession.

Questions to Ask Before Buying A Home with a Friend

The answers to these six questions can make or break your decision to buy a house with a friend.

Looks Can Be Deceiving -- Get Your House Thoroughly Inspected

Foregoing an inspection to save money is tempting, but extremely risky. Read why it's wise to have home inspections when buying, even if for purely informational and peace-of-mind purposes.

Packing Supplies Checklist

These must-have packing supplies will help you have a smooth move.

What You Need to Know About HOAs

Get the lowdown on how a community is managed before you buy.

What to Know About Fixer-Uppers

With patience and elbow grease, you can turn a dump into a dream.

Moving Black Book: The People You Should Tell

Make sure banks, credit card companies, the tax man and other service providers have your new address.

What to Know Before Buying Your First Home

Buying a home is the most important purchase you’re likely to make. You want to get it right.

Mortgage Interest Deduction: Homeowners' Biggest Tax Perk

Here, how the mortgage interest deduction helps improve your bottom line.

Related Pages