PMI Tax Expense / Deduction on Rental Property

[Daniel Hoffmann]

I believe PMI is no longer tax deductible in schedule A, but is it still a tax reducing business expense for rental properties?

I found this article on the IRS website but this cannot be true.
https://www.irs.gov/faqs/sale-or-trade-of-business-depreciation-rentals/rental-expenses/rental-expenses-1

Can I just add the PMI expense to my interest or insurance line in Schedule E?

[Natalie Kolodij]

@Daniel Hoffmann @John Underwood

This was an IRS error and was addressed in a recent reputable publication for tax pros: 

Rental Property Mortgage Insurance—IRS Mistake

Online at the IRS frequently asked rental property questions, you will find the following incorrect question and answer:

• Question: Can you deduct private mortgage insurance (PMI) premiums on rental property? If so, which line item on Schedule E?
• Answer: No, you can’t claim a deduction for private mortgage insurance premiums.

This is wrong.

The cause for the error comes from IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes), where on page 1 in the “What’s New” section, the IRS states that the deduction for mortgage insurance premiums expired and you can’t claim that deduction for premiums after 2017 unless lawmakers extend the break.

The mistake that the IRS makes in its publication and FAQ is that the expiration of the mortgage insurance deduction applies to your qualified personal residence, not your rental property.