NAHREP joins a coalition to urge Congress to permanently extend the Mortgage Insurance Premium Tax Deduction

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December, 2022

Last month, NAHREP joined a coalition to urge the Senate to make the current mortgage insurance premium tax deductions permanent and increase its income phaseout. For years, mortgage insurance premiums have been tax deductible and subject to an income phaseout for taxpayers with adjusted gross incomes (AGI) over $100,000 (or $50,000 if single or married, filing separately). Millions of low- and moderate-income homeowners have benefited from the tax code. However, the provision’s temporary nature and low income phaseout could create a burden in allowing additional families to claim the deduction. The AGI cap has not changed since 2007, when the deduction first took effect.

Congress allowed homeowners to receive a tax break on the premium payments but was not extended to the 2022 tax year. To extend the mortgage insurance tax deduction would benefit millions of families – 4.6 million families used mortgage insurance premiums last year, alone.

Let’s do a quick refresher: what is a private mortgage insurance premium?

A Private Mortgage Insurance Premium (or PMI) is an additional insurance policy for homeowners that protects the lender if they cannot pay the mortgage. This monthly fee is included in the homeowner’s mortgage payment and is required for homeowners with a down payment less than 20%. PMI allows homeowners to buy now and start building equity instead of waiting to have enough money for a down payment.

In other words, most families who benefit from the mortgage insurance premium tax deduction are first-time homebuyers who are low- to moderate-income, including those with FHA or VA loans. This could disproportionally impact Latino borrowers who are nearly twice likely to have FHA-insured mortgages than the general market.

Okay, but what do taxes have to do with it?

Homeowners have benefitted from the tax deduction for mortgage insurance premiums in the past. For example, over 1.3 million households have been able to receive an average $2,100 deduction in the 2020 tax year. This deduction eases the financial burden of homeownership for low-income to moderate-income families.

NAHREP and other organizations are now calling for the mortgage insurance premium tax deduction to be made permanent and increase its income phaseout to benefit even more families. With high home price appreciation, low housing inventory, and spiking interest rates, affordability remains a barrier to homeownership—and extending these changes could allow more first-time homebuying families to build wealth.