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TERMINOLOGY

Along with the benefits of having your own space, home buying also offers some excellent tax benefits. For example, in many cases all of the interest you pay on your mortgage loan is tax deductible. That means if you take out a $200,000 loan, during the first year of your mortgage, you may be eligible to deduct roughly $12,000 on your tax returns.

If you are a new home-buyer and you paid points on your mortgage, you can deduct a portion of those points during the same year you bought the house. Private mortgage insurance is also now deductible for many borrowers. Through 2010, any homeowner who bought a home or refinanced a mortgage since January 1, 2007 is eligible to deduct mortgage insurance premiums paid each year.

Another possible tax benefit is available to first-time home buyers with incomes below the median income of their area. These individuals can take advantage of a mortgage interest credit that gives tax credit for part of the interest they pay each. This credit will, however, decrease the amount of interest a borrower can deduct from her taxes.

There may be other tax benefits available to you based on your situation. Consult a tax professional for full details.