Good news for homebuyers: mortgage insurance (MI) premiums are permanently tax-deductible — and that can lower the cost of buying a home, especially for buyers putting down less than 20%.
What changed
- In July 2025, Congress made the MI tax deduction permanent beginning with the 2026 tax year. That means eligible borrowers can deduct MI premiums going forward without worrying the benefit will expire again.
- The deduction applies to: private mortgage insurance (PMI) on conventional loans; FHA mortgage insurance premiums (upfront and annual); VA funding fees; and USDA guarantee fees.
- MI will be treated as deductible mortgage interest beginning in tax year 2026, simplifying how borrowers claim it.
Who can use it
- The deduction is available to taxpayers who itemize and whose adjusted gross income (AGI) is below $100,000 for joint filers (or $50,000 for single filers). The benefit phases out for AGIs roughly between $101,000 and $109,000.
- Because you must itemize to claim MI, talk with a tax professional to confirm this is the right move for your situation.
Why it matters to buyers
- Lowers cost of homeownership: Deducting MI reduces taxable income and effectively lowers the net cost of paying MI premiums.
- Expands purchasing power: Lower effective monthly payments can let buyers qualify for larger or better homes without waiting years to save a 20% down payment.
- Better planning: Permanent rules reduce uncertainty for buyers weighing low-down-payment financing.
A simple example
- If a qualified borrower pays $2,400 in MI premiums in a year and is in the 22% federal tax bracket, the deduction could reduce federal tax by roughly $528 (22% of $2,400), lowering the effective annual cost of MI.
Other related tax changes to know
- The current mortgage interest deduction cap of $750,000 ($375,000 for single filers) was also made permanent, avoiding a return to prior limits.
- For 2025–2029 only, the state and local tax (SALT) deduction cap is temporarily raised from $10,000 to $40,000 — helpful for buyers in high-tax states.
What to tell your loan officer or tax advisor
- Ask how MI deductibility affects your monthly payments and overall affordability.
- Confirm whether itemizing makes sense for your tax picture and whether the AGI limits affect you.
- If you’re deciding between saving for a larger down payment or buying now with MI, ask for a side-by-side cost comparison that includes the tax benefit.
The permanent MI tax deduction makes low-down-payment financing more attractive and predictable. If you’re thinking about buying or refinancing, this change could reduce your effective costs and help you get into a home sooner. Contact your favorite mortgage loan officer to see how this benefit applies to your specific loan options — and consult a tax professional to confirm eligibility and maximize savings.
