“How much, if at all, can we use of that paid premium as a tax deduction for our taxes this year?”---> Normally the IRS allows a deduction of mortgage insurance in the same year it is paid. (Mortgage insurance premiums are an itemized tax deduction and are reported on Sch A Line 13. )This does not apply to prepaid mortgage insurance. Prepaid mortgage insurance must be deducted over the shorter of the loan's amortization period or seven years. For example, if the proper period would be seven years, you take the gross amount paid and divide it by 84 months, then multiply the number of months it was paid during the year by the monthly amount. If you purchase your home in May, and your first payment is July 1, then you would only deduct eight months of prepaid mortgage insurance(May-Dec) and six months of monthly mortgage insurance, since only six mortgage payments were made. If your adjusted gross income on Form 1040, line 38, is more than $109k, you cannot deduct your mortgage insurance premiums.