Tax time

Are you still trying to decide if you should rent or buy a home? Think about these tax benefits of being a home owner.

1. At purchase: In many cases the points and origination fees on your loan are tax deductible. Look at lines 801 and 802 on your settlement statement to see how much you paid.

2. Mortgage interest: You can deduct the interest paid on your mortgage and home equity loans. In the beginning of the loan, this is a large chunk of the monthly payment and you could be saving almost a third of the interest expense through deductions. Also, if you are paying private mortgage insurance and purchased or will purchase your home between January 1, 2007 and December 31, 2010, the private mortgage insurance is tax deductible too. Don't forget about your property taxes. You can get deductions for the property taxes in the year it is paid, not the year you put it in your escrow account.

3. At sale: If you owned and occupied your home as your principle residence for 2 of the last 5 years you can earn up to $500,000 on the sale for married couples or $250,000 for singles and pay no federal income tax at all. So that means you can buy a fixer-upper, work on it for nights and weekends for two years (while living in it) then sell it for a nice profit, tax free!

http://new.realtor.com/Basics/Buy/ClosePossess/TaxBenefits.asp?poe=realtor
http://www.bankrate.com/brm/itax/news/taxguide/sweet-home1.asp?caret=4b