Hopefully, you and your partner saved a substantial amount of money to use as a down payment on your first home. If not, you may be required to take out private mortgage insurance. PMI protects the lender when the borrower cannot afford a 20 percent down payment on a house. The premiums, although cash out of your pocket, only benefit the lender. If you meet certain requirements, you may be able to deduct your mortgage insurance premiums on your taxes.
You can deduct mortgage insurance premiums only if they qualify. Qualified premiums are provided by certain government agencies, such as the Federal Housing Administration and Department of Veteran's Affairs, and eligible private mortgage insurance companies. Check with your lender to ensure that your PMI insurance is from an acceptable, qualified source before deducting it on your taxes. Check your form 1098, which is sent to you each year by your mortgage company, for the exact amount.
Where to Deduct
If you pay qualified mortgage insurance premiums, you can deduct the amount on Schedule A for itemized deductions under the "Interest You Paid" section. This is the same section where you record mortgage interest and points you paid to your lender during the year. You have to itemize your deductions on your taxes to take this deduction.
You can deduct qualified mortgage insurance premium payments if your home loan closed after December 31, 2006. If you have an adjusted gross income, or AGI, that exceeds a certain amount -- $109,000 as of 2009 -- you cannot deduct mortgage insurance premiums. If you're married filing separately, you can't deduct the amount if your AGI is more than $54,500. A filer who has an AGI of $100,000 or more, or $50,000 or more when filing as married filing separately, may have limitations to the amount he can deduct.
Use the Worksheet
The IRS provides you with a "Qualified Mortgage Insurance Premiums Deduction Worksheet" to fill out to determine limitations for deducting mortgage insurance. Again, this applies if your AGI exceeds $100,000, or $50,000 for married filing separately. If applicable to your situation, fill out this worksheet, which is located in Schedule A instructions under the "Qualified Mortgage Insurance Premiums" section, before transferring the deductible amount to your Schedule A form.