Mortgage Insurance Could Be Tax-Deductible Again

If you bought a home with a down payment under 20%, chances are you’re paying for mortgage insurance — and you know how quickly that cost adds up. But now, a bipartisan group in Congress is working to bring back a popular tax break that could put money back in your pocket.

The new Middle Class Mortgage Insurance Premium Act would restore and expand the mortgage insurance premium (MIP) deduction that expired in 2021. This deduction helped millions of homeowners offset the cost of insurance on their tax returns.

What’s changing this time around?

This isn’t just a reboot — it’s an upgrade. Here’s what the bill would do if it passes:

• Reinstates the MIP tax deduction, letting homeowners deduct mortgage insurance costs again.
• Raises the income cap for eligibility from $100,000 to $200,000, meaning more middle-class families could qualify.
• Makes the deduction permanent, so it doesn’t disappear again after a few years.

That’s a big deal, especially in today’s housing market where affordability is stretched thin and insurance premiums are non-negotiable for many buyers.

Why it matters for homeowners

For many first-time and lower-down-payment buyers, mortgage insurance can cost anywhere from $30 to $70 per month for every $100,000 borrowed. Over a year, that adds up quickly. In the past, the deduction helped eligible homeowners save an average of $1,454 a year, according to U.S. Mortgage Insurers.

If Congress passes the new bill, that tax break could return to your toolbox — making it easier to manage monthly costs or even qualify for a bit more house.

Who’s behind the bill?

The legislation is spearheaded by:

• Rep. Vern Buchanan (R-Fla.)
• Rep. Jimmy Panetta (D-Calif.)

Both lawmakers say the goal is simple: help more families afford homes and stay in them. “This is about helping people achieve the American Dream,” said Buchanan. Panetta added, “We want to ensure middle-class families can better manage the cost of homeownership.”

With bipartisan support and nine co-sponsors, this bill could have a real shot.

Will it pass this time?

Efforts to make the deduction permanent have been tried before — and failed. But this time, with affordability concerns taking center stage and a broader push for housing reform underway (like the Neighborhood Homes Investment Act), the political winds might finally shift.

If you want to see this pass, now might be the time to contact your representatives and tell them it matters to you.

The bottom line

Bringing back the mortgage insurance deduction could offer real relief to millions of buyers who feel priced out of the market. If passed, it could mean hundreds — even thousands — in annual tax savings for those paying MIP.

Stay tuned. If you’re a current or future homeowner, this is one piece of legislation that could directly impact your bottom line.