Great question. Here is what the IRS has to say about deducting your mortgage insurance premiums:

Mortgage Insurance Premiums Treated as Home Mortgage Interest

You may be able to treat mortgage insurance premiums you paid during 2007 as home mortgage interest. The mortgage insurance must be paid in connection with home acquisition debt, the mortgage insurance contract must have been issued after 2006, and you must have paid the premiums before 2008 for coverage in effect during 2007. You can deduct mortgage insurance premiums on Schedule A (Form 1040), line 13.

Limit on deduction. If your 2007 adjusted gross income on Form 1040, line 38 is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated.

For more information, see Publication 936, Home Mortgage Interest Deduction, and the instructions for Schedule A (Form 1040).

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