Is Mortgage Insurance Tax Deductible? Rules and Phaseout

Yes, mortgage insurance is tax deductible for 2026 and future years. The One Big Beautiful Bill Act permanently restored the deduction after a four-year gap, so premiums you pay in 2026 can be written off as mortgage interest on Schedule A — provided your adjusted gross income stays under $109,000 ($54,500 if married filing separately), you itemize, and your mortgage insurance contract was issued after December 31, 2006.¹

Who Qualifies

Four conditions have to line up before you can deduct a dollar of mortgage insurance.

Your insurance contract must have been issued after December 31, 2006. Premiums on older contracts never qualify, regardless of your income.¹

The loan has to be acquisition indebtedness: money borrowed to buy, build, or substantially improve the home that secures the debt. The property must also be a qualified residence, meaning your main home or one other home you designate, such as a vacation property. Rentals and investment properties don’t count. Total acquisition debt generally can’t exceed $750,000 ($375,000 if married filing separately) for mortgages taken out after December 15, 2017; mortgages originated on or before that date can carry up to $1,000,000.²

You have to itemize. The 2026 standard deduction is $32,200 for joint filers, $24,150 for heads of household, and $16,100 for single filers or those married filing separately.³ Mortgage insurance alone almost never clears those bars. You’ll need it stacked with mortgage interest, property taxes, state income taxes, and other itemized expenses before the switch pays off.

And your income has to fall below the phaseout, which is strict enough to deserve its own section below.

Which Premiums Count

The deduction isn’t limited to private mortgage insurance. Federal law treats several government-backed charges as qualified mortgage insurance:⁴

Private mortgage insurance (PMI) on conventional loans
FHA mortgage insurance premiums, both the upfront premium and the annual premium
VA funding fees, which starting in 2026 qualify for the deduction⁵
USDA Rural Development guarantee fees, both upfront and annual

The Income Phaseout

This is where most of the surprises happen. The deduction phases out quickly and the thresholds are not indexed for inflation — they’ve been the same since 2006.

For joint filers and heads of household, the deduction starts shrinking once AGI passes $100,000. Every $1,000 (or fraction of $1,000) above that cuts the deductible amount by 10%. At $109,000, nothing is left. For those married filing separately, the phaseout runs from $50,000 to $54,500 in $500 increments.¹

A joint-filing household at $105,000 AGI loses half the deduction. At that point the remaining tax savings may not be worth the effort of itemizing, so run the numbers before you commit to Schedule A.

Upfront and Prepaid Premiums

If you paid a lump-sum premium at closing — the FHA upfront premium and the VA funding fee are the usual suspects — you can’t deduct the whole thing in the year you paid it. The regulations require you to spread the deduction evenly over the shorter of your mortgage term or 84 months, starting the month the insurance was obtained.⁶

If you financed a $6,125 FHA upfront premium on a $350,000 loan, divide by 84. That’s roughly $73 a month, about $876 a year. The rule applies whether you paid in cash or rolled the premium into the loan balance.

Here’s the part that rarely makes it into closing paperwork: if you sell the home or pay off the mortgage before the 84 months are up, the remaining undeducted portion is gone. No deduction is allowed for premiums allocable to periods after the mortgage is satisfied.⁶ That can bite if you refinance early.

Refinances

Mortgage insurance on a refinanced loan can qualify, but only up to the balance of the old mortgage immediately before refinancing. Anything above that — cash you pulled out for renovations or to pay off other debt — is not acquisition debt and the insurance on that portion doesn’t qualify.⁷

Refinance a $280,000 mortgage into a $320,000 loan and only the insurance attributable to the first $280,000 counts. Lenders don’t split this out on Form 1098, so you’ll likely have to prorate it yourself. If you refinanced an FHA loan with a new upfront premium, the 84-month allocation restarts on the new premium, and any undeducted portion from the original upfront premium is forfeited.

How to Claim It

Your mortgage servicer will send Form 1098 (Mortgage Interest Statement) by late January or post it to their online portal. Box 5 reports the total mortgage insurance premiums you paid during the year.⁴ Enter that figure on the mortgage insurance premiums line of Schedule A (Form 1040).

If you’re allocating a prepaid premium over multiple years, enter only the 2026 portion, not whatever Box 5 shows — the form may report the full prepaid amount in the year it was collected rather than the amortized slice.

Check your Box 5 figure against your monthly mortgage statements before filing. Discrepancies happen, and an incorrect number can trigger an automated IRS notice.

The 2022–2025 Gap

The deduction was not available for tax years 2022 through 2025.⁷ The restoration in the One Big Beautiful Bill Act is prospective. You cannot amend those returns to pick up premiums you paid during the gap. The deduction starts again with the 2026 return.

Claiming the deduction when you don’t qualify — because income exceeds the phaseout, the insurance predates 2007, or the debt isn’t acquisition debt — can draw a 20% accuracy-related penalty on the resulting underpayment, plus interest.⁸

1
Office of the Law Revision Counsel. 26 USC 163 Interest
2
Office of the Law Revision Counsel. 26 USC 163 Interest – Section: Special Rules for Taxable Years Beginning After 2017
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Instructions for Form 1098
5
VA News. Home Loan Borrowers Can Now Deduct Funding Fees
6
eCFR. 26 CFR 1.163-11 – Allocation of Certain Prepaid Qualified Mortgage Insurance Premiums
7
Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
8
Internal Revenue Service. Accuracy-Related Penalty