Congress Mortgage insurance deduction. The Senate has passed legislation that would allow homeowners to deduct federal and private mortgage insurance from their 2005 tax returns. The provision allows only a one-time deduction. Sen. Gordon Smith, R-OR, included the measure in a must-pass foreign tax bill that would eliminate certain U.S. export tax breaks. A House version of the tax bill, H.R. 2896, is up for a floor vote but no date has been set.