Yes, you can deduct private mortgage insurance (PMI) premiums for a rental property. The information in the provided prompt, which states that you cannot claim a deduction for private mortgage insurance, is incorrect and refers to an outdated IRS FAQ that mistakenly applied the personal residence deduction expiration rules to rental properties.
PMI for a rental property is considered an ordinary and necessary business expense, fully deductible against your rental income.
How to Deduct on Schedule E
Report the deduction on Line 9, Insurance of Schedule E (Form 1040), Supplemental Income and Loss.
Important Considerations
- Payment Method:
- Monthly Premiums: If you pay PMI monthly, you deduct the total amount paid during that tax year.
- Upfront/Prepaid Premiums: If you paid a lump sum at closing that covers more than one year, you must amortize (spread out) the deduction over the life of the loan or 84 months (whichever is less). You can only deduct the part of the premium that applies to that specific year.
- Documentation: Keep detailed records of all your mortgage insurance payments for documentation purposes. Your lender should provide a Form 1098 at the end of the year, which may show the amount of mortgage insurance paid in Box 4.
- Personal Use: If the property was used for both personal and rental purposes, you must allocate the expenses based on the number of rental days versus personal use days.
