One Big Beautiful Bill Act Brings Back Mortgage Insurance Premium Tax Deduction

The recent passage of the One Big Beautiful Bill Act, spearheaded by President Trump, has brought an exciting tax benefit back for homeowners: the reinstatement and permanent extension of the mortgage insurance (MI) premium deduction. This move is set to provide significant relief for middle-class homeowners and homebuyers, helping them manage the financial burdens of homeownership without raising risks in the housing finance system.

A Big Win for Homeowners and Taxpayers

The reinstatement of the MI premium deduction, which expired after 2021, offers taxpayers the opportunity to deduct mortgage insurance premiums paid to private insurance companies or government agencies such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture’s (USDA) Rural Housing Service (RHS). The tax code originally allowed this deduction starting in 2007, benefiting millions of homeowners who paid premiums on low down payment mortgages.

HUD Secretary Scott Turner praised the bill’s passing, stating, “The One Big Beautiful Bill has passed, locking in the largest tax cut in American history and ushering in America’s Golden Age.”

Tax Relief for Low Down Payment Homeowners

Seth Appleton, President of U.S. Mortgage Insurers, an association that represents leading private MI companies, expressed his support for the reinstatement, calling it a victory for American homeowners. “By restoring this tax deduction, Congress and the President are standing up for American homeowners, homebuyers, and taxpayers,” Appleton said. He noted that this deduction will offer meaningful tax relief to millions of American homeowners who have opted for low down payment mortgages.

In the past, when the deduction was in effect, 44 million claims were made for the MI premium deduction, resulting in $65 billion in total savings. On average, homeowners claimed $1,454 annually, making it a significant source of financial relief. The inclusion of this provision in the One Big Beautiful Bill marks a long-awaited victory for homeowners across the country.

The Impact on Homeownership Access

Mortgage insurance plays a critical role in allowing homebuyers to enter the market with smaller down payments, often as low as 3%. This has enabled many first-time buyers to secure financing sooner, rather than waiting years to save for a hefty down payment. Private MI has also become more affordable over the years, especially after the 2017 tax cuts, and continues to decline in cost thanks to improved risk-based pricing.

Appleton emphasized how this tax relief will further lower the cost of homeownership for low down payment borrowers. He said, “Allowing MI premiums to be deducted at parity with mortgage interest payments further reduces costs for eligible low down payment borrowers.”

A Win for Homebuyers and Taxpayers Alike

Not only does this deduction provide immediate tax relief for homeowners, but it also strengthens the broader housing market by making homeownership more accessible. Since the GSEs (Government-Sponsored Enterprises) entered conservatorship, the private MI industry has helped cover nearly $60 billion in claims, protecting both GSEs and taxpayers from the financial risks associated with housing downturns.

In 2024, the private MI industry supported over 800,000 borrowers, with first-time homebuyers making up about 65% of that number. This surge in support helped facilitate nearly $300 billion in mortgage originations.

Appleton noted, “Just as Congress has taken action to deliver tax relief to individual taxpayers and support middle-class homeowners, the private MI industry serves as a strong, dedicated source of capital that enables homeownership for American families and protects taxpayers from future housing risks.”

Looking Ahead

The reinstatement of the MI premium tax deduction is a major step forward in ensuring that homeownership remains accessible to a wider range of Americans. It not only provides immediate tax benefits but also strengthens the foundation for sustainable homeownership, making it easier for people to enter the housing market and begin building equity sooner.

For taxpayers, this is a win. For homeowners, it’s a chance to achieve the dream of homeownership with fewer financial hurdles. The One Big Beautiful Bill Act stands as a reminder that policymakers can work to make homeownership more attainable without compromising the integrity of the housing finance system. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.