I am a U.S. citizen considering purchasing recreational property (2nd home) in Canada. May I itemize the property taxes that I pay to Canada as well as any interest paid on the mortgage?

Yes you can - from: Frequently Asked Questions - 3.6 6. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)

Deductible real estate taxes include any state, local, or foreign taxes on real property levied for the general public welfare. Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property. For more information, refer to Publication 17, Your Federal Income Tax for Individuals, Chapter 24; Tax Topic 503, Deductible Taxes; and Publication 530, Tax Information for First-Time Home Owners

You can also deduct the interest on the mortgage, as long as the loan meets the usual requirements - see: http://www.irs.gov/pub/irs-pdf/p936.pdf

Mortgage interest on a second home is deductible on schedule A as an itemized deduction, even if the second home is located outside the U.S. The interest should be reported on Schedule A on the line that says mortgage interest not reported on Form 1098. However, if you reside in the U.S. and the lender is a foreign bank, then you are required to withhold 30% tax on the interest portion of the payments, unless a lower treaty rate applies.

Under the current U.S.-Canada Income Tax Treaty, the withholding tax rate on interest is 10%. However, the rate under the new Protocol (not yet in effect) would be 0%. If you want to rely on the treaty, you need to obtain a Form W-8BEN from the foreign bank where the bank certifies that it qualifies for treaty benefits. In either case, you will need to also file Form 1042 and 1042-S reporting that you made interest payments to foreign persons.