Can I Deduct My Mortgage Insurance Premiums? What Homeowners Should Know for Future Tax Filings

Understanding Mortgage Insurance Premiums and Your Taxes

Remember the day you found “the one?” The house with the picturesque kitchen, the cozy living room, and the perfect patio to host friends and family? You couldn’t wait to call it yours.

As much as you love your home, there's no denying that it comes with a laundry list of expenses—including insurance premiums that you had to start paying just to finish all the paperwork. By the end of the year, those premiums can add up to a lot when you look at all your expenses as a homeowner.

The good news is, after a few years of ineligibility, mortgage insurance premiums are now tax-deductible again under the One Big Beautiful Bill Act (OBBB). For tri-state area homeowners, this can add up to hundreds or even thousands of dollars worth of tax deductions come filing season.

Keep reading to learn:

• The eligibility requirements for deducting mortgage insurance premiums

• When these changes go into effect

• How to prepare to save for future filing seasons

  
  

How Did Mortgage Insurance Premium Deductions Change Under The One Big Beautiful Bill Act?

The ability to deduct mortgage insurance premiums previously expired in 2021. Now, under the OBBB, homeowners can include these costs under their mortgage interest deductions and claim premiums once again.

While the ability to do this was only temporary under previous extensions, the change under this bill makes the deductions permanent.

Who Can Deduct Mortgage Insurance Premiums?

To take advantage of these potential deductions, you'll need to meet certain requirements. For starters, you'll need mortgage insurance, which you likely have if you purchased your home with a down payment of less than 20%. You’ll also have to file an itemized return, instead of taking standard deductions.

To be eligible for mortgage insurance premiums deductions, you’ll need to:

1. Have Qualified Insurance

This includes private insurance or government-backed insurance under the:

• Federal Housing Administration (FHA)

• U.S. Department of Veterans Affairs (VA)

• Rural Housing Service (RHS)

In some instances, lender-paid insurance can also qualify.

2. Have A Qualified Residence 

Under these laws, a qualified residence refers to your primary or second home. You won't be able to deduct mortgage insurance premiums on unqualified homes, such as those used solely as rental properties. 

You'll also have to consider how your adjusted gross income will impact your ability to deduct premium expenses.

How Does The Adjusted Gross Income (AGI) Phase-Out Work?

Assuming the same laws are carried over under the OBBB, your eligibility to deduct mortgage insurance premiums begins to phase out when you reach a certain AGI. 

The phase-out goes as follows:

• Initial phase-outs begin at $100,000 AGI

• Deductions are fully disallowed for income above $109,000 AGI for joint filers

• For those who are married filing separately, the deductions are disallowed at $54,500 AGI

It's also important to keep in mind how your mortgage insurance premiums relate to your mortgage interest.

Does The Mortgage Interest Cap Affect The Deduction?

Under the OBBB, you can deduct mortgage interest on up to $750,000 of acquisition debt (debt used to purchase or improve a first or second home). Since mortgage insurance premiums are considered additional mortgage interest, they count toward the same limit, meaning you must factor in how your combined PMI and mortgage interests add up compared to the maximum deduction allowed.

While average homeowners likely won't hit this cap, homeowners in the high-value markets of New York, New Jersey, and Connecticut may find themselves inching closer toward the limit. You'll need to approach these deductions carefully to get the most value.

When Can Tri-State Homeowners Start Claiming Mortgage Insurance Premium Deductions?

Unfortunately, although the One Big Beautiful Bill Act has passed, you won't be able to deduct these costs right away.

Homeowners can begin deducting premiums paid in 2026—meaning you'll claim insurance premiums on your 2027 tax return at the earliest. Any mortgage insurance premiums paid during tax years 2022 to 2025 are essentially a wash in this regard.

Until then, it's best to carefully track all your mortgage insurance payments to have those figures ready. You should also speak with a qualified tax consultant to ensure you’re taking the right steps to get the biggest refund.

Helping Tri-State Homeowners Every Tax Season

At AVM DeMars, we help homeowners in New York, New Jersey, and Connecticut take advantage of every tax deduction possible and keep more money in their pockets. Our team works closely with you to determine whether itemizing makes sense and to put together a detailed plan that puts you in the best possible position come tax season. 

Contact us today to get started!