After a five-year lapse, the mortgage insurance premium deduction is back. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently reinstated it for premiums paid on or after January 1, 2026. If you pay PMI on a conventional loan, FHA mortgage insurance, a VA funding fee, or a USDA guarantee fee, you may now be able to deduct those costs on Schedule A.
What Types of Mortgage Insurance Qualify?
The deduction covers all standard forms of mortgage insurance on a qualified residence:
- Conventional PMI (private mortgage insurance on loans with less than 20% down)
- FHA mortgage insurance premiums (MIP), both monthly and upfront
- VA funding fees
- USDA guarantee fees
The underlying loan must have been used to buy, build, or substantially improve your primary home or one designated second home. Investment properties do not qualify.
How Does the AGI Phaseout Work?
PMI Deduction Phaseout
CautionThe deduction begins phasing out at $100,000 AGI ($50,000 for married filing separately). You lose 10% of the allowable deduction for every $1,000 your AGI exceeds that threshold. At $110,000 AGI ($55,000 MFS), the deduction is fully eliminated.
The phaseout is steep. If your AGI is $105,000 and you paid $2,400 in PMI during the year, you have exceeded the threshold by $5,000, which triggers a 50% reduction. Your deductible amount is $1,200, not $2,400.
If your AGI is at or above $110,000, the deduction is zero regardless of how much you paid in mortgage insurance.
Monthly vs. Upfront Premiums: Different Rules Apply
How you pay the premium determines how you deduct it:
- Monthly premiums (standard PMI, monthly FHA MIP): fully deductible in the year paid
- Upfront premiums (FHA UFMIP, VA funding fee, USDA upfront guarantee fee): must be amortized over the shorter of the loan term or 84 months (7 years)
If an upfront premium was rolled into your loan balance rather than paid in cash at closing, you still amortize it. You do not get to deduct the full amount in year one.
Your lender or servicer should report annual premiums paid in Box 5 of Form 1098. Upfront amounts may not appear on Form 1098, so keep your closing disclosure for documentation.
Does the Loan Need to Be from 2026?
No. There is no requirement that the mortgage originated in 2026. If you took out a loan in 2018 and have been paying PMI since then, premiums you pay in 2026 and beyond are deductible (subject to the AGI limit). The provision is prospective only. Premiums paid in any year from 2022 through 2025 remain non-deductible.
Should You Itemize or Take the Standard Deduction?
This deduction only matters if you itemize on Schedule A. In 2026 the standard deduction is $16,100 (single) and $32,200 (married filing jointly).
Run a quick tally each year. Add up your mortgage interest, state and local taxes (capped at $40,000 under OBBBA), charitable contributions, and now PMI premiums. If the total exceeds the standard deduction and your AGI is below $110,000, itemizing captures additional savings.
How to Claim It
Report deductible mortgage insurance premiums on Schedule A in the mortgage insurance premiums section (Line 8d on recent versions of the form). The amount from Form 1098, Box 5 flows directly here. If you paid an upfront premium, calculate the annual amortization amount and report only that portion each year.
Questions about your mortgage deductions or whether itemizing makes sense for your situation? Contact TS CPA for a free consultation. We respond within the same day.