As part of President Trump’s Big Beautiful Bill, a provision is included to reinstate and make permanent the deductibility of mortgage insurance (MI) premiums, returning a deduction to taxpayers that will provide middle-class homeowners with meaningful tax relief without increasing risk in the housing finance system.
“The One Big Beautiful Bill has passed, locking in the largest tax cut in American history and ushering in America’s Golden Age,” said HUD Secretary Scott Turner via X.
Beginning in 2007, the tax code allowed qualified homeowners to deduct MI premiums paid to private MI companies and government agencies, including the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and U.S. Department of Agriculture’s (USDA) Rural Housing Service (RHS), from their federal income taxes. This deduction expired after tax year 2021.
“By restoring this tax deduction, Congress and the President are standing up for American homeowners, homebuyers, and taxpayers,” said Seth Appleton, President of U.S. Mortgage Insurers, an association representing the nation’s leading private MI companies. “We welcome the inclusion of this deduction in the One Big Beautiful Bill Act, and the tax relief it will deliver to millions of hard-working American homeowners with low down payment mortgages.”
During the time the previous tax code was in effect:
- The MI premium deduction was claimed 44 million times, representing a combined $65 billion in deductions.
- Four million homeowners claimed the deduction annually.
- The average deduction amount was $1,454 per qualified taxpayer.
Previous efforts to reinstate the deduction were supported by lawmakers from both parties and chambers of Congress, as well as a broad coalition of industry groups, housing advocates, and civil rights organizations, as well as lawmakers from both parties and chambers of Congress. Past standalone bills to reinstate the deduction were championed by Sens. Thom Tillis and Maggie Hassan, as well as Reps. Vern Buchanan and Jimmy Panetta.
USMI’s “2024 National Homeownership Market Survey” found that Americans see private MI as providing benefits including enabling borrowers to qualify for mortgage financing with a down payment as low as 3%, allowing access to homeownership and the ability to begin building equity sooner. Rather than waiting years to save for large down payments, private MI allows homebuyers to get off the sidelines sooner and is a small cost that has declined in recent years due to the 2017 Trump tax cuts and enhanced risk-based pricing. Allowing MI premiums to be deducted at parity with mortgage interest payments further reduces costs for eligible low down payment borrowers.
“Just as Congress has taken action to deliver tax relief to individual taxpayers and support middle class homeowners by reinstating and making permanent the MI premium deduction, the private MI industry serves as a strong, dedicated source of private capital that each and every day enables homeownership for American families and protects taxpayers writ large from the risks of future housing downturns,” said Appleton. “In fact, since the GSEs entered conservatorship, the private MI industry has covered nearly $60 billion in claims, shielding the GSEs and the taxpayers who stand behind them from significant financial losses.”
Recently released data from U.S. Mortgage Insurers show that the private MI industry helped more than 800,000 borrowers secure mortgage financing in 2024. First-time homebuyers who will now be able to claim the MI premium deduction represented approximately 65% of purchasers with private MI. In addition, the industry supported nearly $300 billion in mortgage originations in 2024, according to public filings, representing $300 billion worth of mortgage credit extended to borrowers for which Fannie Mae and Freddie Mac, taxpayers, lenders, and investors are protected from risk of loss.
