Income Limits and Timing

• You can only claim a deduction for mortgage insurance premiums if you meet the income limits for your filing status and your mortgage originated after 2006. If you took out your mortgage in 2006 or earlier, the IRS does not allow a deduction for your mortgage insurance premiums. As of 2011, the income limit for claiming a full mortgage insurance premium equals $100,000 for all filing statuses except married filing separately, in which case the limit equals $50,000. If you fall between $100,000 and $109,000 ($50,000 and $54,500 for married filing separately), your deduction is reduced.
  
  

Types

• The FHA charges both an upfront mortgage insurance premium and annual mortgage insurance premiums. You can deduct the upfront mortgage insurance premium at the time you take out the loan. You can deduct your annual mortgage insurance premiums in the year they are due, assuming you paid them. For example, if you prepay the mortgage insurance premium for 2012 in 2011, you would not be able to deduct the mortgage insurance premium until 2012.
  
  

Deduction Value

• The amount you can deduct for your mortgage insurance premiums equals the mortgage insurance premiums paid for the year. Your lender will send you a Form 1098 that shows the amount of mortgage insurance premiums paid in box 4. If your income falls in the reduced deduction value, you must complete the Qualified Mortgage Insurance Premiums Deduction Worksheet in the Schedule A instructions to figure out how much you can deduct.
  
  

Claiming the Deduction

• To claim the deduction, you must itemize your income tax deductions with Schedule A. When you itemize, the IRS requires that you use Form 1040 for your tax return. On Schedule A, you report the value of your mortgage insurance premium deduction on line 13. This amount, plus any other itemized deductions, such as the mortgage interest deduction, lowers your taxable income for the year. However, you cannot claim the standard deduction if you itemize.