When buying a home, especially with a small down payment, many homeowners are required to pay mortgage insurance. While this added cost can feel like a financial burden, some good news is that under certain circumstances, mortgage insurance premiums may be tax deductible. But when is this deduction available, who qualifies, and how can you claim it?
This guide will break down everything homeowners need to know about the tax treatment of mortgage insurance in 2025.
What Is Mortgage Insurance?
Mortgage insurance protects the lender, not the borrower, in case the homeowner defaults on their loan. It’s typically required when a borrower puts down less than 20% on a conventional loan.
There are several types of mortgage insurance:
- Private Mortgage Insurance (PMI) – Common on conventional loans.
- Mortgage Insurance Premiums (MIP) – Required for FHA loans.
- Guarantee fees (G-fees) – Charged by USDA and VA loans.
Regardless of the type, mortgage insurance adds to your monthly costs—but it can offer some tax benefits, depending on current IRS rules.
Is Mortgage Insurance Tax Deductible in 2025?
Yes—but with conditions.
As of tax year 2023, mortgage insurance premiums were deductible for eligible filers under the Consolidated Appropriations Act of 2021, which extended the deduction through December 31, 2021, and was later extended through 2022. However, Congress has not yet extended this deduction for tax years 2023 and beyond as of mid-2025.
So, for your 2024 or 2025 tax return, mortgage insurance is not currently tax deductible unless new legislation is passed to reinstate the deduction.
What Happens If Congress Reinstates the Deduction?
Historically, when the deduction has been extended, it has been retroactive. That means if Congress acts late in the year or early next year to revive the deduction, you could amend your return or file with the updated rules.
Keep an eye on IRS announcements or consult a tax professional if you suspect the rules may change.
Who Qualified for the Mortgage Insurance Deduction?
When the deduction was in place, eligibility was based on:
1. Income Limits
- Full deduction available to households with adjusted gross income (AGI) up to $100,000 (or $50,000 if married filing separately).
- Deduction phased out between $100,000 and $109,000 AGI.
- No deduction above $109,000 AGI.
2. Filing Status
- Available to those itemizing deductions using Schedule A.
- Not available to those taking the standard deduction.
3. Loan Origination Date
- Only applicable to loans originated after 2006.
How to Claim the Mortgage Insurance Deduction (If Applicable)
If the deduction is revived for 2025 or a past year and you qualify:
- Get Form 1098 – Your lender provides this statement, which shows the amount of mortgage insurance paid.
- Use Schedule A (Form 1040) – Enter your mortgage insurance premiums under the “Interest You Paid” section.
- Verify AGI Eligibility – Make sure your income is within the deduction limits.
- Consult a Tax Professional – If you’re amending past returns, professional guidance is highly recommended.
Are FHA, VA, or USDA Mortgage Insurance Premiums Deductible?
Yes—if the deduction is active.
FHA Loans:
- You pay Mortgage Insurance Premiums (MIP), both upfront and annually.
- The IRS previously treated MIP the same as PMI for deduction purposes.
VA Loans:
- The funding fee may be included in the deductible mortgage interest (if financed).
- Ongoing mortgage insurance isn’t required, so deductions are limited.
USDA Loans:
- Feature a guarantee fee similar to PMI.
- Deductible under past IRS rules if paid as part of monthly mortgage payments.
If Congress extends the deduction again, these types of premiums would likely be included once more.
What to Do If the Deduction Isn’t Available
If the deduction for mortgage insurance isn’t extended:
- Use the standard deduction: This may be the better option unless your itemized deductions exceed:
- $13,850 for single filers
- $20,800 for heads of household
- $27,700 for married couples (as of 2023, adjusted annually)
- Maximize other deductions: You may still be able to deduct:
- Mortgage interest
- Property taxes
- Charitable contributions
- Medical expenses (over 7.5% of AGI)
What Are the Pros and Cons of Mortgage Insurance?
Even without a tax deduction, mortgage insurance can help make homeownership more accessible. Here’s a quick look:
Pros:
- Allows buyers to purchase with less than 20% down.
- Helps build home equity sooner.
- May be temporary—PMI can be removed once you reach 20% equity.
Cons:
- Adds a monthly cost to your mortgage.
- Not tax-deductible unless specifically extended by Congress.
- Offers no direct benefit to the borrower if never used.
How to Get Rid of Mortgage Insurance
If you’re asking, “Why did my mortgage payment go up?” it might be due to mortgage insurance premiums increasing or being added after a change in loan terms. Consider these options if you’re looking to eliminate mortgage insurance:
- Refinance to a loan without PMI if your home’s value has increased.
- Pay down your loan until you reach 20% equity.
- Request cancellation directly with your lender (for conventional loans only).
- For FHA loans, refinance into a conventional loan to drop MIP.
Will Mortgage Insurance Be Tax Deductible in the Future?
While there’s no guarantee, it’s possible Congress will revive the deduction due to continued pressure from homeowner advocacy groups and industry stakeholders.
What to watch for:
- IRS updates during tax season
- Year-end tax extender bills from Congress
- News from mortgage or tax advisory services
Closing Thoughts
Mortgage insurance can be a necessary cost of buying a home with a small down payment. Whether or not it’s tax deductible depends on current legislation, which as of mid-2025 does not allow the deduction.
Quick Recap:
- Currently not deductible for 2025 tax returns unless extended by Congress.
- In the past, was deductible for incomes below $109,000 AGI.
- Applies to PMI, MIP, and USDA fees.
- Use Schedule A if eligible and if itemizing.
For now, stay updated with IRS changes, explore other tax-saving strategies, and consider paying down your mortgage or refinancing to eventually remove mortgage insurance altogether.
FAQs About Mortgage Insurance and Taxes
Q: Is mortgage insurance tax deductible every year?
No. The deduction has expired and been renewed multiple times by Congress. It is not currently deductible for 2024 or 2025.
Q: Can I amend a return if the deduction is reinstated retroactively?
Yes, you can file an amended tax return using Form 1040-X if rules change and you qualify.
Q: Is mortgage interest still deductible?
Yes. Mortgage interest remains deductible for many taxpayers who itemize.
Q: Can I deduct mortgage insurance if I take the standard deduction?
No. Mortgage insurance deductions are only available if you itemize your deductions on Schedule A.