Can I Claim My Mortgage Insurance on My Tax Return?

Qualifying Mortgage Insurance

Mortgage insurance can take several different names depending on the type of mortgage you take out. If you take out a conventional mortgage, your lender typically calls it private mortgage insurance; the Department of Veterans Affairs, Federal Housing Administration and the Rural Housing Service charge mortgage insurance premiums. You can also include the funding fees. Only mortgages originated in 2007 or later can qualify for the deduction.

Some mortgages, such as Department of Veterans Affairs mortgages, include a funding fee when you take out the mortgage. You can include these upfront mortgage insurance premiums in your deduction in the year you take out the mortgage. However, other mortgages may require you to prepay mortgage insurance for the first several years at the time you take out your mortgage. If so, you must deduct the premiums in the year to which they are allotted. If the prepaid mortgage covers more than seven years, you can instead amortize the deduction over seven years.

As of 2011, you cannot deduct all of your mortgage insurance premiums if your adjusted gross income exceeds $100,000 ($50,000 if filing separately). If your adjusted gross income falls between $100,000 and $109,000 ($50,000 and $54,500 for couples filing separately), you can deduct part of your mortgage insurance. To figure the deduction amount, subtract the limit for your filing status --- $100,000 or $50,000 --- from your adjusted gross income and round up to the next multiple of $1,000 ($500 if married filing separately). Divide the result by $10,000 ($5,000 if married filing separately) and multiply the result by your mortgage insurance premiums paid. Subtract the result from the amount you paid to calculate your deduction. For example, if you are single and had an adjusted gross income of $105,100, subtract $100,000 from $105,100 to get $5,100. Round $5,100 up to $6,000, and divide $6,000 by $10,000 to get 0.6. If you paid $1,500 in mortgage insurance, multiply 0.6 by $1,500 to get $900, then subtract $900 from $1,500 to find your deduction limit equals $600.

Your tax Form 1098 shows your mortgage insurance premiums paid for the year in box 4. Claiming your mortgage insurance on your tax return requires that you itemize your income tax deductions. Report itemized deductions on Schedule A, with your mortgage insurance going on line 13. Report the sum of your itemized deduction, including your mortgage premium deduction, on line 29 of Schedule A and, instead of claiming the standard deduction, report the sum of your itemized deductions on line 40 of your Form 1040 tax return.