Mortgage Insurance: Deductible Once Again Starting Tax Year 2026
Last year, President Trump and Congress reinstated and made permanent the federal tax deduction for mortgage insurance (MI) premiums with the enactment of the One Big Beautiful Bill Act. As you get ready to file taxes this year, keep in mind that the next time tax season rolls around (known as tax year 2026), qualifying homeowners will once again be able to deduct premiums paid to private MI companies and government agencies on their federal income taxes. This will be the first time since tax year 2021 that this deduction will be available and will make homeownership more affordable by providing meaningful tax relief for working-class homeowners, without increasing risk in the housing finance system.
MI premiums were previously deductible for tax years 2007-2021 and, during that time, the deduction was claimed 44.5 million times. At a time when access to homeownership can seem out of reach due to limited housing supply and high interest rates, Congress and President Trump are standing up for working-class Americans by restoring the tax deduction and delivering meaningful and targeted tax relief for homeowners by reinstating and making permanent the MI premium deduction.
For tax years 2007 through 2021, when it was previously available, an average of 3.4 million homeowners claimed the MI deduction annually, claiming a total of $64.7 billion in deductions. The annual average MI deduction per qualified taxpayer was $1,454, supporting low- and moderate-income homeowners. The last year that the tax deduction was available, the average MI deduction went up to $2,346. Unfortunately, the MI premium deduction expired after tax year 2021, depriving taxpayers of this much-needed benefit at a time when homeownership costs like homeowners insurance, property taxes, and utilities dramatically increased.
There have been consistent efforts to make the MI premium deduction permanent and provide targeted tax relief to borrowers with mortgage insurance, the majority of whom are first-time homebuyers. This included bipartisan, bicameral support led by Senate Finance Committee Chairman Mike Crapo (R-ID), Senators Thom Tillis (R-NC) and Maggie Hassan (D-NH), and Representatives Vern Buchanan (R-FL-16) and Jimmy Panetta (D-CA-19). In addition, a broad coalition of industry groups, housing advocates, and civil rights organizations such as the NAACP, Mortgage Bankers Association (MBA), American Bankers Association (ABA), Housing Policy Council (HPC), and National Association of REALTORS ® (NAR), has consistently supported this targeted tax policy.
Private MI enables homebuyers without access to a large down payment to buy a home with tens of thousands of dollars less cash due at the closing table. Not only does the One Big Beautiful Bill Act make private MI an even more attractive option for homebuyers by making premiums tax deductible once again, private MI is one of the few costs of homebuying and homeownership that has decreased in recent years. For example, since 2017, homeowners insurance has gone up 26% and property taxes have increased by 27%. The cost of private MI, as measured by publicly reported data on in-force premium yields, has declined 25% since 2017, in stark contrast to other costs of homeownership, reaffirming that the small, temporary cost of monthly private MI provides homebuyers, lenders, the GSEs, and taxpayers with outsized benefits. Families without access to large cash down payments will now see even more savings thanks to the reinstated MI premium deduction.
While the deductibility of MI premiums will provide additional support for homebuyers, it does so without adding additional risk to the housing finance system. Beyond just those who will be able to deduct their premiums going forward, the private MI industry benefits the American taxpayer more broadly by standing as dedicated private capital that enables homeownership for American families without large down payments and protects taxpayers from losses on mortgages during future housing downturns. In fact, private mortgage insurers have covered almost $60 billion in claims since the government-sponsored enterprises (GSEs) entered conservatorship in 2008 by standing as a first layer of private capital to protect the system against default risk. The $60 billion represents significant savings for both the federal government and taxpayers.
Despite homeownership being at the center of the American Dream, a 2024 USMI survey found that a majority of Americans felt that homeownership was increasingly out of reach. Private MI makes the dream more attainable by eliminating the need for a 20% down payment – one of the top challenges that Americans report in buying a home – and allowing for a down payment as small as 3%, helping American families become homeowners sooner. The MI tax deduction that was brought back by the One Big Beautiful Bill Act is yet another step in making the American Dream of homeownership more affordable, without increasing taxpayer risk. USMI applauds the deduction’s reinstatement and will continue to work with federal policymakers to make homeownership more affordable for hardworking American families.
