Effective for the 2019 tax year, taxpayers are once again allowed to deduct Mortgage Insurance Premiums (PMI).
Prior to the Tax Cuts and Jobs Act of 2017, eligible taxpayers were able to deduct premiums paid for Mortgage Insurance which is a requirement for certain borrowers who put less than a 20% down payment on their home purchase. This benefit was eliminated for the 2018 tax year but was just recently retroactively extended through tax year 2020.
Whether taxpayers benefit from the deduction will depend on the amount of their total itemized deductions compared to the new Standard Deduction of $12,200 ($24,400 joint filers). Taxpayers must also meet certain income requirements as well.
Mortgage Insurance Premiums are usually reported on the same Form 1098 as your Mortgage Interest Paid, so it is important to report all values listed on Form 1098 to ensure you benefit from all allowed deductions. While prior-year 2018 Form 1098 were not required to report Mortgage Insurance Premiums, taxpayers may benefit from obtaining the amounts paid and amending their 2018 returns since they are now eligible for the deduction. We also recommend monitoring your loan-to-value ratio to determine if you can avoid paying PMI in the future.