July 9, 2025

Mortgage Insurance Premiums are Tax-Deductible: What it Means for Borrowers

In a major win for homebuyers, mortgage insurance (MI) premiums are once again tax-deductible, and this time, the benefit is here indefinitely. For borrowers, that means potential savings at tax time. For loan officers, this development presents an opportunity to engage homebuyers with meaningful insights on potential cost savings.  

Understanding the MI Premium Tax Deduction
The MI premium tax deduction, first introduced in 2007, allows qualified borrowers to deduct their mortgage insurance premiums from their federal income taxes. After expiring in 2021, this tax benefit has now been reinstated indefinitely,  offering a potential  advantage for homeowners with MI.

How This Benefits Borrowers
This reinstatement translates to tangible savings for some borrowers with MI. Based on historical data, the average deduction amount was $1,454 per qualified taxpayer. For some, it could be higher. In tax year 2021, qualified homeowners received an average deduction of $2,364.  This deduction may be particularly beneficial for first-time homebuyers and those who opt for low-down-payment mortgages, as it helps further reduce the cost of homeownership. This deduction may assist first-time buyers as they enter the market because approximately 65% of borrowers whose loans have MI are  first-time homebuyers.ⁱ Recent data from the U.S. Mortgage Insurers show that private MI helped over 800,000 borrowers secure a mortgage in 2024 alone. 

Navigating the MI Tax Deduction 
Navigating these changes can be confusing. Here are some key points to consider:
1. Identify qualifying borrowers: The deduction applies to qualified homeowners with MI premiums. This includes private MI and government-backed options like FHA, VA, and USDA loans.
2. Educate potential homebuyers: For those considering a home purchase, explain how this deduction could affect their overall costs depending on income limits. 
3. Collaborate with tax professionals: Always consult with tax professionals for personalized advice on how this deduction applies to a specific situation or transaction. 

The Role of Private Mortgage Insurance
MI is designed to be a catalyst for homeownership, allowing buyers to purchase homes with down payments as low as 3% in some circumstances. It enables many to begin building equity sooner rather than later, and now, with the tax deduction in place indefinitely, it may be even more advantageous for those who qualify.
The reinstatement of the MI premium tax deduction is  a key development in the housing market. By understanding and effectively communicating the potential benefits of this deduction, you can help make homeownership more accessible and affordable for many. 

At the time of this article’s publication, the IRS has not released guidelines  for this change. This communication is intended to convey general information only and not to provide any legal or accounting advice or opinions. An attorney or accountant should be consulted for specific information.

© 2025 Radian Group Inc. All Rights Reserved.  550 East Swedesford Road, Suite 350, Wayne, PA 19087.   “Radian” is a brand of Radian Group Inc., including its licensed insurance affiliates. Mortgage insurance is provided and underwritten by Radian Guaranty Inc., a wholly owned subsidiary of Radian Group Inc. with home offices at 550 East Swedesford Road, Suite 350, Wayne, PA 19087 . Radian Guaranty Inc. is a monoline mortgage insurance company licensed to write business in all 50 states, the District of Columbia and Guam.  This communication is provided for use by real estate or mortgage professionals only and is not intended for distribution to consumers or other third parties.  This does not constitute an advertisement as defined by Section 1026.2(a)(2) of Regulation Z.  

ⁱ U.S. Mortgage Insurers (July 3, 2025)  https://www.usmi.org/one-big-beautiful-bill-act-restores-mortgage-insurance-premium-tax-deduction-delivering-tax-relief-to-middle-class-homeowners/