What's a Qualified Mortgage Insurance Premium?

If your mortgage lender requires you to pay for mortgage insurance as a condition of your mortgage, you could be able to deduct those payments on your income taxation. The IRS describes payments which qualify for the deduction as”qualified mortgage insurance premiums” Higher-income people aren’t qualified to take this deduction.


Mortgage lenders see people as higher-risk borrowers when they can’t create a significant deposit when they buy a home. To protect themselves in case of default, they require you to pay for a mortgage insurance policy in the event the sum of your mortgage is greater than 80% of the price of the home you’re purchasing. The insurance policy prohibits the lender in case you stop making your payments. The premiums for the policy are included on your monthly mortgage payment. As soon as you have paid down the mortgage enough that it’s less than 80% of the value of this house –78 percent in the case of government-backed loans–you no longer desire insurance, and the premiums stop.


Since mortgage is part of the price of obtaining a mortgage, the IRS views it the same as mortgage interest, which is deductible on income taxation. If you took out the mortgage after 2006, your mortgage premiums are”qualified,” meaning that you can subtract them like interest–subject to specific constraints.


To qualify, mortgage insurance must be obtained via the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service or a private mortgage insurance (PMI) supplier who meets the needs of the Homeowners Protection Act of 1998. Any PMI supplier approved by your lender–and it’s usually the lender who arranges the policy, even though you pay for it–should qualify for IRS purposes.


Each year, your lender must send you and the IRS a copy of Form 1098, the”Mortgage Interest Statement.” This form lists home-related payments within the past year which may impact your income taxation, including mortgage interest received by the creditor, property taxes paid by the creditor on your behalf and mortgage insurance premiums you have paid. The total quantity of the insurance premiums will be in Box 4 of this form. To claim a deduction for qualified mortgage insurance premiums, you need to itemize your deductions using Schedule A; there is a space to enter the sum in the”Interest You ” section of Schedule A.


The deduction for qualified mortgage insurance premiums phases out quickly if your adjusted gross income is greater than $100,000. You have to lower your deduction by 10 percent for every $1,000 of adjusted gross income over $100,000. If your adjusted gross income is over $109,000, then you cannot claim the deduction in any way. If your filing status is”married, filing separately,” the reduction starts at an adjusted gross income of $50,000, you lower the deduction from 10 percent for every $500 within the limit, and the deduction disappears above $54,500.

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