The mortgage insurance premium deduction is back for premiums paid or accrued after December 31, 2025, which means the amount in Box 5 of your Form 1098 can once again be deducted as qualified residence interest on Schedule A, starting with your 2026 return. The One Big Beautiful Bill Act, signed on July 4, 2025, restored the write-off after a four-year lapse and, unlike every earlier version of this provision, made it permanent.1The White House. President Trump’s One Big Beautiful Bill Is Now the Law To actually use the deduction, you have to itemize, the loan has to qualify, and your income has to fall below the phase-out ceiling.
What Premiums Qualify
The tax code’s definition of “qualified mortgage insurance” is broad. It covers insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, the Rural Housing Service, and private mortgage insurance as defined by the Homeowners Protection Act.2Office of the Law Revision Counsel. 26 USC 163 – Interest In practice, four common costs qualify:
- PMI on a conventional loan, which lenders require when the down payment is below 20% of the purchase price.
- FHA mortgage insurance, including both the upfront premium (typically 1.75% of the loan amount, financed into the loan) and the ongoing annual premium paid monthly.
- The VA funding fee, a one-time charge on a VA-backed home loan. VA loans do not carry monthly mortgage insurance, but the funding fee itself qualifies.3VA News. Home Loan Borrowers Can Now Deduct Funding Fees
- The USDA guarantee fee, both upfront and annual, on Rural Housing Service loans.
One boundary catches people. Insurance contracts issued before January 1, 2007 do not qualify, no matter when the premiums were paid.2Office of the Law Revision Counsel. 26 USC 163 – Interest An FHA loan you’ve been paying on since 2005 stays outside the deduction.
Who Can Actually Take the Deduction
Three conditions have to line up.
You have to itemize on Schedule A instead of taking the standard deduction.4Internal Revenue Service. Topic No. 501, Should I Itemize? With the standard deduction where it is, many homeowners come out ahead without itemizing. Run the numbers both ways before assuming Box 5 helps you.
The loan has to be acquisition indebtedness, meaning you used it to buy, build, or substantially improve a qualified home. A cash-out refinance that paid off credit cards does not count. The home can be your primary residence or one second home, and it can be a house, condo, co-op, mobile home, boat, or RV, as long as it has sleeping, cooking, and bathroom facilities.
Your adjusted gross income has to fall below the phase-out ceiling. The deduction shrinks by 10% for every $1,000 (or fraction of $1,000) that your AGI exceeds $100,000. For married filing separately, the phase-out starts at $50,000 and reduces by 10% per $500 increment.2Office of the Law Revision Counsel. 26 USC 163 – Interest The math:
- AGI at or below $100,000: full deduction.
- AGI of $104,500: $4,500 over the threshold rounds up to five $1,000 increments, so the deduction drops by 50%.
- AGI of $109,000 or more: nothing left ($54,500 for married filing separately).
If you are near the boundary, an adjustment like a larger retirement plan contribution can pull your AGI back under $100,000 and preserve the full deduction.
Prepaid and Lump-Sum Premiums
A lump-sum premium paid at closing is not fully deductible in the year you paid it. The IRS requires you to spread the premium ratably over the shorter of the mortgage term or 84 months, beginning with the month the insurance was obtained.5eCFR. 26 CFR 1.163-11 – Allocation of Certain Prepaid Qualified Mortgage Insurance
Say you paid an $8,400 upfront FHA premium on a 30-year loan. That allocates to $100 per month, or $1,200 for a full calendar year. Close in September and only four months of that first year count.
If you refinance or sell before the allocation period ends, the remaining unallocated premium is gone. You cannot accelerate it into the year of the refinance. This surprises homeowners who refinance after just a few years.
Finding the Number on Form 1098
Your lender reports total mortgage insurance premiums paid during the year in Box 5 of Form 1098. Lenders are required to report premiums of $600 or more when the Section 163(h)(3)(E) deduction applies.6Internal Revenue Service. Instructions for Form 1098 Mortgage Interest Statement The figure includes monthly payments and any lump-sum amount from closing, though the lump-sum piece has to be allocated under the rule above rather than deducted in full.
If Box 5 is blank or looks wrong, ask your loan servicer for a corrected form. Reporting errors happen more often on USDA and VA loans, where the insurance structure differs from conventional PMI. You are still entitled to the deduction if the amount is right and the form is wrong, but a corrected 1098 saves you from having to document the figure yourself.
How to Claim It on Your Return
The deduction goes on Line 8d of Schedule A (Form 1040), in the “Interest You Paid” section, next to the mortgage interest from Box 1.7Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction The IRS treats qualifying premiums as a form of qualified residence interest, so they sit alongside regular mortgage interest on the return.
Start with the amount in Box 5. If any of it is a lump-sum premium, substitute the allocated portion for the year in place of that piece. Then apply the AGI phase-out reduction if your income exceeds $100,000. The result is what goes on Line 8d. Keep the 1098 and any allocation calculations with your tax records.
When the Insurance (and the Deduction) Ends
The deduction only helps while you are still paying premiums, and federal law gives you ways out sooner than you might expect on a conventional loan.
For PMI on a conventional loan, the Homeowners Protection Act requires the lender to automatically cancel the insurance once the principal balance is scheduled to reach 78% of the home’s original value, as long as you are current on payments.8Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan? You can also request cancellation earlier, once the balance drops to 80% of original value, if you are current, have no junior liens, and can show the home’s value has not declined.9HelpWithMyBank.gov. At What Point Can I Remove the Private Mortgage Insurance (PMI) From My Loan?
FHA loans work differently. The annual MIP on most FHA loans originated after June 2013 lasts for the life of the loan if the down payment was less than 10%. Put 10% or more down and FHA drops the premium after 11 years. Otherwise the only exit is to refinance into a conventional loan once you have enough equity.
If PMI is canceled partway through the year, deduct only the premiums you actually paid up to the cancellation date. Any refund of unearned premiums from the insurer reduces the deductible amount for that year.