Is Your PMI Tax-Deductible in 2026? Check This Income Line

Talia bought a condo last summer with 8% down, and every month since, $110 of her mortgage payment has gone to private mortgage insurance. That's $1,320 a year for a policy that protects her lender if she stops paying. In September her boss gave her a raise that should push her adjusted gross income to about $106,500 for 2026, and she was thrilled. Nobody told her the raise would also wipe out most of a tax break she'd never heard of. (Talia is a hypothetical, but her numbers are realistic.)

The break is the PMI tax deduction, and it's back for the first time since 2021. If you pay mortgage insurance of any kind, premiums you pay in 2026 can count as deductible mortgage interest on your federal return. The catch is that the deduction comes with two filters most people fail at least one of, and you have about three months left to do anything about the second one.

What changed for 2026

The One Big Beautiful Bill Act, signed July 4, 2025, permanently restored the deduction for mortgage insurance premiums starting with premiums paid on or after January 1, 2026. It had lapsed after the 2021 tax year, so anything you paid from 2022 through 2025 stays nondeductible. There's no going back to amend those years.

It covers more than conventional PMI. According to a May 2026 breakdown from the CPA firm TS CPA, the deduction applies to:

• Monthly PMI on a conventional loan with less than 20% down
• FHA mortgage insurance premiums (both the monthly MIP and the upfront fee)
• VA funding fees
• USDA guarantee fees

Your loan doesn't have to be new. If you closed in 2019 and you're still paying PMI, the premiums you pay this year qualify. The loan does have to be for your main home or one second home, though. Rental properties don't count.

Upfront charges work differently from monthly ones. An FHA upfront premium or a VA funding fee generally gets spread out over the shorter of the loan term or 84 months, so you deduct a slice each year instead of the whole thing at once. If you paid one recently, hang on to your closing disclosure, because your lender's tax form may not show it.

The deduction was popular the last time around. The mortgage insurance trade group USMI says it was claimed 44.5 million times between 2007 and 2021, and the average deduction in 2021 was $2,346.

Filter one: you have to itemize

This is where most people drop out. PMI only counts if you itemize deductions on Schedule A, and very few households do anymore. For the 2023 tax year, only about 9.4% of taxpayers itemized, according to the Congressional Research Service.

For 2026, the standard deduction is $16,100 if you're single and $32,200 for married couples filing jointly. To come out ahead, your mortgage interest, state and local taxes, charitable gifts, and now your PMI have to add up to more than that.

Clearing the bar is easier than it was a couple of years ago. The SALT cap went from $10,000 to $40,000 in 2025 and $40,400 for most filers in 2026, and PMI is now one more line on the pile. If you bought in the last couple of years at a 6% or 7% rate, your interest alone might be bigger than you think.

What it's worth when you're close to the line

What the deduction saves you is the premium times your tax bracket, and only on the part that pushes you past the standard deduction.

Take a married couple, Jordan and Alexis, with a $96,000 AGI. They bought in spring 2024 with 5% down, and their $361,000 loan at 6.75% throws off about $23,800 of interest in 2026. Add $4,500 in property tax and $3,500 in state income tax, and they're at roughly $31,800, just under their $32,200 standard deduction, so without PMI they'd skip itemizing.

Their PMI runs about $2,166 a year. Add it in and they're at about $33,900, which is $1,700 or so above the standard deduction. In the 12% bracket, that's worth around $208.

So $2,166 in premiums buys them about $208 back. That's real money, and it's also about 10 cents on the dollar.

Talia, the condo owner, is in better shape on this front. As a single filer, her interest (about $15,400) plus $6,300 in state and local taxes already puts her well over the $16,100 standard deduction. Every dollar of her PMI is extra, and in the 22% bracket her $1,320 of premiums would save her about $290.

Filter two: the income cliff

Talia's problem is the income limit, and it's the reason to look at this now instead of in April.

The deduction starts shrinking once your AGI goes over $100,000. That number is the same for single filers and married couples filing jointly, which feels unfair if you're a two-income household, but that's the rule. If you're married filing separately, it's $50,000.

For every $1,000 your AGI goes over the line, you lose 10% of the deduction. And per the IRS's own rules from the last time this deduction existed (Publication 936), a partial $1,000 counts as a whole one. So if you're over by $1, you lose 10%. Once your AGI tops $109,000, the deduction is gone completely. (Some guides say it disappears at $110,000. The IRS math says $109,000.)

For Talia, the math stings. At $106,500, she's $6,500 over the line, which counts as seven steps of 10%. She loses 70% of her deduction, so only $396 of her $1,320 counts. Instead of saving about $290, she saves about $87.

The $100,000 limit is the same one this deduction used before it lapsed in 2021. It isn't adjusted for inflation, so every year more homeowners drift over it without getting any richer.

The year-end fix: lower your AGI, not your income

If you're in that $100,000 to $109,000 window, you have a way out, and it's something you'd probably want to do anyway: put more into pre-tax retirement accounts before December 31.

Traditional 401(k) and 403(b) contributions come out of your paycheck before they hit your AGI. So does money you put into an HSA through payroll. Every dollar there pulls your AGI down dollar for dollar.

Talia has roughly six paychecks left this year. If she bumps her 401(k) contribution enough to put in an extra $6,500 by December 31, her AGI drops to $100,000 even. Two things happen. The $6,500 contribution saves her about $1,430 in federal tax by itself at 22%. And her full $1,320 PMI deduction comes back, which is worth another $203 or so compared with the shrunken version. Altogether she comes out about $1,633 ahead, and the $6,500 still belongs to her, in her retirement account.

The 2026 employee limit for a 401(k) is $24,500, so most people in this income range have plenty of room. Check with HR or your payroll portal on how fast a change takes effect; some employers need a pay cycle or two.

A deductible traditional IRA contribution also lowers AGI, and you can make one for 2026 until April 15, 2027. Whether it's deductible depends on your income and whether you have a workplace plan, so run that one past your tax software before you count on it.

Don't keep PMI just for the deduction

I can already hear the question: if PMI is deductible now, should I stop trying to get rid of it? No.

Even in the best case, the deduction gives you back your tax bracket's share of the premium. At 12% or 22%, you're still out 78 to 88 cents of every PMI dollar. Canceling it saves you the whole dollar.

Under federal law, you can ask your servicer to cancel PMI once your balance hits 80% of your home's original value, and it has to drop off automatically at 78%. If your home has gone up in value, some lenders will let you use a new appraisal to get there sooner. Treat the deduction as a small consolation while you're stuck paying PMI, and keep working toward getting rid of it.

How to claim it next spring

Your servicer should report the PMI you paid in Box 5 of Form 1098, the mortgage interest statement that shows up in January. The amount goes on Schedule A with your other mortgage interest. Tax software will apply the income phaseout for you, but it can only do that if you itemize, so make sure you're not clicking past Schedule A because you assumed it wouldn't matter.

If you had an FHA upfront premium or VA funding fee, it may not appear on the 1098 at all. In that case, your closing disclosure is the record you'll need.

Bottom Line

The PMI deduction is back, and it's permanent this time. For most people it's worth a couple hundred dollars at best, and only if you itemize and your AGI stays at $100,000 or less. Here's what to do this week:

1. Find your 2026 PMI total. Log into your mortgage servicer's site and multiply your monthly PMI or MIP by 12. Write it down.
2. Run a rough itemizing check. Add your expected 2026 mortgage interest (it's on your servicer's year-to-date statement), property taxes, state income tax, charitable gifts, and PMI. If the total beats $16,100 single or $32,200 joint, you'll likely itemize.
3. Estimate your AGI. Pull your latest pay stub and project the year. If you land between $100,000 and $109,000, every $1,000 matters.
4. If you're in the window, raise your 401(k) contribution today. Spread the amount you need to get under $100,000 across your remaining paychecks before December 31. You'll lower your tax bill and keep your full PMI deduction.