Mortgage tax deductions are only on a primary home, so they don't apply to owners of rental units.
Put simply: property taxes are NOT a penalty for homeownership, they are paid by everyone. Mortgage tax credit is only given to homeowners.
Mortgage interest on a rental unit is deductible against the rental income on that unit for obvious reasons: it's a business expense for the rental business and hence taken out of gross revenue for that business to figure out the (taxable) profits.
Specifically, for US individual federal taxes in 2016, see Form 1040, Schedule E, line 12. This is the form you use if you haven't actually formally incorporated your rental activity as a business.
Note that you can also deduct your spending on repairs to the rental property, insurance on it, property taxes (line 16 on that form), and so forth, for the exact same reasons: income taxes on business-like activity are levied on net income, not gross income.
The only people who can't take a mortgage interest deduction are people who have a second home that they are _not_ renting out.
Yeah, mortgage tax deduction, like all incentives that encourage borrowing more money, ends up being a transfer of wealth from new homebuyers to whoever had owned property outright (whether older long-term homeowners or developers or real estate investors).
Very important point.