We purchased a new primary home in Oct 2007, and we have been unable to sell the original home. We also have PMI (Private Mortgage Insurance) on the unsold property. I understand that this is now deductible for 2008. The unsold property has been vacant since we moved out in Oct 2007.
Can we deduct the mortgage interest paid on both homes?
Or, is there a better way to maximize our tax situation with this unsold burden?
Thanks for your time and advice...

Whether or not you may deduct the mortgage interest, (known as aquistion debt by the IRS) paid on both homes, depends on whether or not you debt has exceeded certain limits established by the IRS.

The IRS has stated that "interest on "acquisition debt" is deductible as long as the debt doesn't exceed for $1 million for married filing joint taxpayers ($500,000 if you are married filing separately.) Acquisition debt is defined as debt that is used to buy, build, or improve your home. Acquisition debt is a type of qualified home mortgage interest.

The IRS has stated that "interest on a mortgage secured by a second home is also deductible," however, the IRS has also stated "the total debt from first and second homes combined should not exceed the $1 million for MFJ taxpayers and $500,000 MFS taxpayers."

Thus to answer your question, yes, the interest paid on both the homes is deductible as long as acquisition debt does not exceeed the limits established by the IRS.

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Thanks for the response. We are not close to the cap.
Thanks again for your time...