PMI on a rental: a straightforward operating deduction
If you pay private mortgage insurance (PMI) or an FHA mortgage insurance premium (MIP) on a rental property loan, the premiums are deductible as an ordinary and necessary business expense on Schedule E. This is true for residential rentals, commercial rentals, and mixed-use properties to the extent of the rental portion.
There is no income phase-out for the rental property PMI deduction — unlike the primary residence PMI deduction that existed under Section 163(h)(3)(E), which was subject to an AGI phase-out and was eliminated after 2021. Rental property PMI falls under the general rental expense rules of Section 212, not the homeowner interest deduction provisions.
What counts as deductible mortgage insurance on a rental
Deductible premiums include: monthly PMI payments on a conventional loan (typically required when the down payment is less than 20%), FHA annual mortgage insurance premiums, VA funding fees (if paid as a separate annual amount rather than financed upfront), USDA guarantee fees, and lender-paid mortgage insurance where the cost is passed through in the interest rate (slightly different treatment, but generally embedded in the deductible interest).
If you paid an upfront MIP at closing (such as the 1.75% FHA upfront MIP), the treatment is slightly different: it is amortized over the life of the loan as a prepaid interest or loan cost, not deducted all at once in the year paid. Spread the upfront premium over the loan term and deduct a pro-rata portion each year.
Tracking and allocating PMI when the property has mixed use
If your property has both rental and personal use (for example, a duplex where you live in one unit and rent the other), you must allocate the mortgage insurance premium between the two uses. The rental portion of the PMI is deductible on Schedule E; the personal-use portion follows the primary residence rules (which, after 2021, generally means it is not deductible).
For a property that is 100% rental, the full PMI premium is deductible on Schedule E in the year paid (for monthly premiums). Keep your annual mortgage statement (Form 1098), which typically reports PMI paid during the year in Box 5.
Frequently asked questions
Is PMI on a rental property deductible?
Yes. PMI and MIP on rental property loans are fully deductible as operating expenses on Schedule E, with no income phase-out.
What about the upfront FHA mortgage insurance premium?
The upfront MIP at closing is amortized over the life of the loan, not deducted all at once in the year paid. Deduct a pro-rata portion each year.
Does the rental PMI deduction phase out at higher incomes?
No. The rental property PMI deduction has no income phase-out — only the (now-expired) primary residence PMI deduction had one.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.