Counted as interest
Many homeowners itemize deductions because their mortgage interest and property tax payments exceed the standard deduction amount they could claim.
It's in the "Interest You Paid" section of your Schedule A that you'll find the private mortgage insurance deduction. It is claimed on line 13.
What amount of PMI do you claim? You should find the amount in box 4 of the Form 1098 (or the substitute year-end loan information statement) that your lender sent you.
Time, occupancy restrictions
While it's easy to claim the PMI deduction, make sure you meet the requirements.
First, note when you paid the mortgage insurance. The deduction is allowed only if you took out the mortgage on which you pay PMI on or after Jan. 1, 2007. No PMI premiums are deductible if they were made in connection with a home loan that was made before that date.
Any associated PMI premiums on new mortgages issued through 2014 will qualify for the deduction.
If you refinanced your home since Jan. 1, 2007, you also qualify for the PMI deduction on that loan. Be careful as to how you structure your refi. The mortgage insurance deduction applies to refinances up to the original loan amount, but not to any extra cash you might get with the new home loan.
You also might be able to deduct private mortgage insurance payments on a second home loan. As with your primary residence, the loan on the second home must have been issued in 2007 or later to be deductible.
The additional property also must be for your personal use as a second or vacation home. If you rent it out, then you could end up paying the PMI without any help from the IRS, unless you claim tax breaks on the home as rental property.
Finally, while there is no statutory limit on the amount of PMI premiums you can deduct, the amount might be reduced based on your income.
The deduction begins being phased out when the homeowner's adjusted gross income, or AGI, is more than $100,000. This income limit applies to single, head of household or married filing jointly taxpayers. The phaseout begins at $50,000 AGI for married persons filing separate returns.
The PMI deduction is reduced by 10 percent for each $1,000 a filer's income is over the AGI limit. The deduction disappears completely for most homeowners whose AGI is $109,000 or $54,500 for married filing separately taxpayers.
The Schedule A instructions include a work sheet, as does most tax preparation software, that homeowners can use to determine their reduced private mortgage insurance deduction amount.