Is Mortgage Insurance (PMI) tax deductible?
On a rental property – Yes, it is! PMI (Private Mortgage Insurance - also called Mortgage Insurance "MI" or Lender's Mortgage Insurance "LMI") is an insurance policy payable to the lender that covers their extra risk in the case a borrower defaults on a high loan to value (LTV) residential real estate loan. Typically PMI comes into play on loans that are over 80% LTV of the property.
Printer-Friendly
A common misconception of this insurance is that the PMI payments are never tax deductible. For your personal residence this is generally true although some new provisions are in place for 2007 that may, or may not, be extended. For investment properties, however, this insurance is completely tax deductible as an expense on your rental property. Just as the interest you pay on a loan is deductible, and property taxes are deductible, so are PMI payments!
Other Articles
This information is important when shopping for a loan. If you are financing more than 80% LTV of your investment property and are automatically considering two loans instead of a single loan just to get around PMI you may be making a mistake. Two loans (one at 80% and a 2nd for a portion or all of the balance) may still be the better choice but don't automatically rule out the one loan products.
For direct confirmation from the IRS that PMI is, indeed, tax deductible on a rental property please see this IRS web page. For a discussion of PMI and the differences between it and Mortgage Life Insurance please see PMI vs. Mortgage Life Insurance. -back to tutorial index-
