Standard disclosure involving taxes: ask your accountant.

Mortgage insurance is common when the buyer is putting less than 20% down on a property purchase. There are ways of avoiding it by taking out a second loan at the time of purchase but these loans almost always have higher interest rates than the primary 80% loan. The advantage is that the interest paid on the second loan has always been tax deductible. Mortgage insurance is not deductible. That is until 2007.

Borrowers closing loans to purchase homes in 2007 who have annual household incomes of $100,000 or less will be able to get a low down payment mortgage and deduct the full cost of their mortgage insurance premiums on their federal tax return.

Source.