The mortgage premiums you paid monthly, will be fully deductible. However, the premium you paid at closing may be subject to amortization.
Through 2016, if you pay mortgage insurance premiums on a qualifying policy issued after 2006, you can generally deduct the premiums as additional mortgage interest. Claim the deduction on Line 13 of Schedule A.
The full deduction can only be taken if your Adjusted Gross Income (AGI) is $100,000 or less ($50,000 if you use married filing separate status). The deduction is phased out for incomes greater than this. The amount of PMI that you pay for the year can be found on Form 1098, which you receive from your mortgage lender.
Mortgage insurance, which protects the lender if you default, should not be confused with more common homeowner’s or fire insurance.
Can
I deduct Mortage Insurance PMI or MIP?
Special rules for prepaid mortgage insurance. Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.
Example.
Ryan purchased a home in May of 2015 and financed the home with a 15-year mortgage. Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Since the $9,240 in private mortgage insurance is allocable to periods after 2015, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Ryan's adjusted gross income (AGI) for 2015 is $76,000. Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2015. For 2016, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less.
In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months).
Limit on deduction. If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. See
Line 13 in the instructions for Schedule A (Form 1040) and complete the
Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums.
