Yes, the PMI tax deduction is back for 2026. The One Big Beautiful Bill Act makes mortgage insurance premiums deductible again as qualified residence interest for tax years beginning after December 31, 2025. Premiums you pay in 2026 go on line 8d of Schedule A on the return you file in 2027. There are two catches. You have to itemize. And the deduction drops by 10% for every $1,000, or part of $1,000, that your AGI is over $100,000. It's gone entirely above $109,000, or $54,500 if you're married filing separately.
Last updated: October 24, 2026 · By Syed Kaja Moinudeen
- Mortgage insurance premiums paid in 2026 are deductible again. 2022–2025 premiums don't qualify.
- The deduction covers conventional PMI, FHA mortgage insurance (MIP), VA funding fees and USDA (Rural Housing Service) guarantee fees on policies issued after 2006.
- Once AGI passes $100,000 ($50,000 MFS), you lose 10% of the deduction for each $1,000 ($500 MFS) over the limit. Nothing is left above $109,000 ($54,500 MFS).
- It only helps if your itemized deductions beat the 2026 standard deduction: $16,100 single, $24,150 head of household, $32,200 married filing jointly.
- Prepaid premiums are generally spread over 84 months. VA and USDA fees are the exception.
- If your AGI is just over $100,000, a 401(k) or HSA contribution before December 31 can bring back the full deduction.
The PMI Deduction Is Back for 2026: What Changed and Why It Matters
Congress has let the mortgage insurance deduction lapse and then revived it several times. The last version stopped covering amounts paid after December 31, 2021, so Internal Revenue Code §163(h)(3)(E) did nothing for premiums paid in 2022 through 2025.
Section 70108 of Public Law 119-21, the One Big Beautiful Bill Act signed July 4, 2025, turned that cutoff off for tax years beginning after December 31, 2025. The IRS lists the change in Revenue Procedure 2025-32. The draft 2026 Publication 936 says the deduction "has been reinstated for tax year 2026" and is claimed on Schedule A, line 8d.
Here's what the timing means for you:
- Tax year: premiums paid January 1 through December 31, 2026.
- Filing season: early 2027, on your 2026 Form 1040.
- No look-back: the change isn't retroactive, so there's nothing to recover for 2022–2025.
Which Mortgage Insurance Counts: Conventional PMI, FHA MIP, VA Funding Fee and USDA Guarantee Fee
The IRS Form 1098 instructions define qualified mortgage insurance as coverage from the Department of Veterans Affairs, the Federal Housing Administration or the Rural Housing Service (the USDA program), plus private mortgage insurance as defined in the Homeowners Protection Act of 1998. The contract must have been issued after December 31, 2006.
The insurance also has to be tied to acquisition debt on a qualified residence. That means a loan used to buy, build or substantially improve your main home or one second home. Homeowners insurance doesn't count. Neither does mortgage insurance on a rental property.
| Premium type | Counts for 2026? | If prepaid at closing |
|---|---|---|
| Conventional monthly PMI | Yes | N/A (deduct what's paid each year) |
| Single-premium PMI | Yes | Spread over 84 months or the loan term, whichever is shorter |
| FHA annual MIP | Yes | N/A |
| FHA upfront MIP (1.75%) | Yes | Spread over 84 months or the loan term |
| VA funding fee | Yes | No 84-month allocation required |
| USDA / RHS guarantee fee | Yes | No 84-month allocation required |
The 1.75% FHA upfront premium comes from HUD Mortgagee Letter 2023-05. The exemption for VA and RHS fees is in Treasury Regulation §1.163-11.
The $100,000 AGI Phaseout Explained, With Worked Examples
The statute cuts the deduction by 10% for each $1,000, "or fraction thereof," that your adjusted gross income (Form 1040, line 11b) is over $100,000. If you're married filing separately, the steps are $500 above $50,000. Because "fraction thereof" counts any partial step as a full one, an AGI of $103,200 loses 40%, not 32%.
That's why sources disagree on where the deduction ends. At exactly $109,000 you still keep 10%. One dollar more and it's gone. So "zero above $109,000" is the correct way to say it. Here's how $2,000 of annual PMI fares at different incomes:
| AGI (single or joint) | Amount over $100K | Reduction | Deductible of $2,000 |
|---|---|---|---|
| $95,000 | $0 | 0% | $2,000 |
| $103,000 | $3,000 | 30% | $1,400 |
| $103,200 | $3,200 (4 steps) | 40% | $1,200 |
| $106,000 | $6,000 | 60% | $800 |
| $109,000 | $9,000 | 90% | $200 |
| $110,000 | $10,000 | 100% | $0 |
Two things to know. First, the $100,000 threshold is the same for single and joint filers, which puts married couples at a disadvantage. Second, it isn't adjusted for inflation. A married-filing-separately filer with $52,000 of AGI is $2,000 over, which is four $500 steps and a 40% cut.
Will You Actually Benefit? The 2026 Itemize vs. Standard Deduction Test
PMI is an itemized deduction, so it only saves you money if your Schedule A total is higher than your 2026 standard deduction: $16,100 single or MFS, $24,150 head of household, $32,200 married filing jointly.
The larger state and local tax (SALT) cap makes itemizing more realistic for many homeowners. For 2026 it's $40,400 ($20,200 MFS), according to Rev. Proc. 2025-32. That's slightly higher than the $40,000 figure you'll see quoted for 2025. The cap phases down once modified AGI is above $505,000. Mortgage interest stays deductible on up to $750,000 of acquisition debt ($375,000 MFS), per Publication 936.
Quick worksheet: add your 2026 mortgage interest (Form 1098, Box 1), deductible PMI after the phaseout, state and local taxes up to the cap, and charitable gifts. Compare the total with your standard deduction.
- Example A (married, AGI $98,000): $14,500 interest + $1,800 PMI + $9,000 SALT + $2,500 charity = $27,800. That's below $32,200, so they take the standard deduction and the PMI deduction is worth $0.
- Example B (single, AGI $85,000): $11,000 interest + $1,500 PMI + $5,500 SALT = $18,000. That beats $16,100. Without PMI the total would be $16,500, so PMI adds the full $1,500. In the 22% bracket, that's about $330 off the tax bill.
Prepaid and Upfront Premiums: The 84-Month Allocation Rule
If you pay mortgage insurance that covers future years, you generally have to spread it over the shorter of the loan's stated term or 84 months, starting with the month you got the insurance. The draft 2026 Publication 936 has an example: a borrower pays $9,240 of prepaid premiums, deducts $880 for eight months of 2026 ($110 a month) and $1,320 for the full year 2027.
Using the same math, a $300,000 FHA loan closed in January 2026 with a $5,250 upfront MIP (1.75%) works out to $62.50 a month, or $750 deductible for 2026. That's on top of the regular annual MIP.
- VA funding fees and USDA guarantee fees are exempt from the allocation rule under §1.163-11.
- Selling or refinancing early: if the mortgage is paid off before the allocation period ends, you can't deduct the unamortized remainder.
- Fees rolled into the loan: paying a fee in cash at closing and financing it into the balance can be treated differently. Check your Form 1098 and ask a tax professional before you deduct a financed fee in one lump.
How to Claim It: Form 1098 Box 5, Schedule A Line by Line, and Recordkeeping
- Find Box 5 on each Form 1098. Lenders report mortgage insurance premiums of $600 or more per mortgage, including prepaid amounts (Form 1098 instructions).
- Add the amounts if you had more than one servicer. If your loan was sold mid-year, you may get two 1098s. Add their Box 5 amounts together.
- Apply the phaseout using the worksheet in Publication 936 if your AGI is above $100,000 ($50,000 MFS).
- Enter the result on Schedule A, line 8d. That line said "Reserved for future use" in 2025.
- Keep your proof: closing disclosure, escrow statements and annual escrow analysis.
If Box 5 is blank, remember that the $600 threshold is a reporting rule for lenders, not a minimum for the deduction. Use your escrow statements to document what you actually paid, and ask your servicer for a year-end breakdown. Your 2026 form may also be filled out based on draft guidance, so check that the box covers 2026 premiums.
Year-End 2026 Moves to Stay Under the $100K Limit
Say your projected AGI is $104,500 and you pay $2,400 of PMI. You're $4,500 over, which is five steps, so half the deduction ($1,200) disappears. Lowering AGI by $4,500 before December 31 would restore it. Ways to do that:
- Traditional 401(k): the 2026 limit is $24,500, plus an $8,000 catch-up at age 50 or older, or $11,250 at ages 60–63 (IRS). Payroll deferrals have to come out of 2026 paychecks, so change your election now. If you're 50 or older, read up on the new Roth catch-up rule first, because Roth contributions don't reduce AGI.
- HSA: $4,400 self-only or $8,750 family, plus $1,000 at age 55 or older (Rev. Proc. 2025-19). You need a qualifying high-deductible health plan. HSA contributions for 2026 can be made up until your filing deadline.
- Traditional IRA: up to $7,500 ($8,600 if 50 or older). If you're covered by a workplace plan, your income may limit how much you can deduct (IRS).
- Bonuses and gains: if your employer normally pays bonuses in January, don't ask to move yours into December. Put off selling winning investments until 2027, or sell losing ones. Net capital losses can offset up to $3,000 of other income (Topic 409).
- December mortgage payment: on most loans, interest is paid in arrears, so making January's payment in December can move December's interest into 2026. This doesn't work for PMI, because premiums that cover future periods are treated as paid in those periods.
Deduction vs. Elimination: When Removing PMI Saves More
Even a full deduction gives you back only a fraction of what you pay. On $1,800 of PMI in the 22% bracket, the most you'd save is $396. Getting rid of the PMI saves the whole $1,800.
- Request cancellation at 80%. Under the Homeowners Protection Act, you can ask in writing once your balance reaches 80% of the home's original value. You need a good payment history, and the home's value can't have dropped (CFPB). Making extra principal payments gets you there sooner.
- Automatic termination at 78%. If you're current on payments, your servicer must end PMI on the date your scheduled balance reaches 78% of the original value.
- Reappraisal. If your home has gained value, some servicers will consider a new appraisal. This depends on their policy, not federal law, so ask about their rules.
- FHA loans. Annual MIP lasts 11 years if your original loan-to-value was 90% or less, and for the life of the loan if it was above 90% (HUD ML 2023-05). Refinancing into a conventional loan once you have 20% equity is usually the only way to drop life-of-loan MIP.
Frequently Asked Questions
Is mortgage insurance tax deductible in 2026?
Yes. Qualified mortgage insurance premiums paid in 2026 are deductible again as qualified residence interest. You claim them on Schedule A, line 8d, but only if you itemize and your AGI is $109,000 or less ($54,500 if married filing separately).
What is the income limit for the mortgage insurance premium deduction?
The deduction starts shrinking once AGI is over $100,000 ($50,000 MFS). You lose 10% for each $1,000 ($500 MFS), or part of one, over the limit. Above $109,000 ($54,500 MFS), nothing is left. These thresholds aren't adjusted for inflation.
Can I deduct PMI if I take the standard deduction?
No. Mortgage insurance is an itemized deduction. If your itemized total is below $16,100 (single), $24,150 (head of household) or $32,200 (married filing jointly) for 2026, the PMI deduction gives you no benefit.
Is the VA funding fee tax deductible?
Yes. VA coverage counts as qualified mortgage insurance, and VA funding fees don't have to be spread over 84 months the way prepaid PMI or FHA upfront premiums do. The income phaseout still applies. If the fee was rolled into your loan, ask a tax professional how to handle it.
Can I deduct PMI on a rental or investment property?
Not under this deduction. It only applies to acquisition debt on your main home or one second home. Rental property expenses follow separate rules in IRS Publication 527.
Can I amend my 2022–2025 returns to claim PMI?
No. The deduction ended after 2021 and the new law applies only to tax years beginning after December 31, 2025. Premiums paid from 2022 through 2025 weren't deductible.
Does my state allow the deduction?
It depends on the state. Some states follow federal itemized deductions and others don't. Check your state tax agency's 2026 instructions before you count on a state-level benefit.
Is the PMI deduction permanent?
The 2025 law removed the expiration date that made earlier versions keep lapsing, and the IRS has added the deduction back to its 2026 forms. Congress can still change it in the future.
Sources
- IRS draft 2026 Publication 936, Home Mortgage Interest Deduction
- IRS Revenue Procedure 2025-32
- IRS 2026 inflation adjustments
- IRS Instructions for Form 1098
- 26 U.S.C. §163 and 26 CFR §1.163-11
- IRS 2026 401(k) and IRA limits
- IRS Rev. Proc. 2025-19 (HSA limits)
- CFPB: Removing PMI
- HUD Mortgagee Letter 2023-05
Disclaimer: This article is educational information only and is not financial, tax or legal advice. Consult a qualified tax professional about your situation.
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