The American public for years has counted on one of the few remaining great benefits of the tax system – Homeownership.

Homeownership provides a vehicle to increase or create personal tax breaks on a yearly basis, items such as mortgage interest, points, and other real estate related taxes and expenses are deductible. These expenses are noted on your settlement statement (HUD-1) that you were given at your closing. The settlement statement (HUD-1) is an itemized expense sheet that indicates all of the real estate related expenses both buyer and seller incurred during the purchase/sale of the home.

Your lending institution will also provide you with a form 1098 in January indicating the interest you paid on your home loan in the previous year. The combination of the settlement statement (HUD-1) and the Form 1098 will give you an accurate measure of your potential deductions.

Several items listed on your settlement statement (HUD-1), such as title insurance, appraisal charges, credit report fees, and revenue stamp, are not normally deductible on your federal tax return. You should consult with your tax advisor for more specific information.

If we look at just a single factor, mortgage interest, it is clear why homeownership provides a great tax benefit. As an example, if you have a 30 year fixed loan and you make monthly payments with a principal loan amount of $200,000, and an interest rate of 6.5% in the first year, you pay approximately $12,934 in interest and over the course of the loan you will pay approximately $255,085, in interest alone. Yearly mortgage expensive will be tax deductible each year over the course of the loan for the majority of homebuyers. Assuming you make 12 monthly payments during your first year of homeownership you may have a $12,934 tax break, in interest payments alone, not counting other deductible expenses.

Is it true that you can get tax breaks as a home buyer? YES just look at the example above. Homeownership is and will remain one of the best purchases people can make to create tax benefits.

Authors Bio
James Smith is a Real Estate Broker with Keller-Williams Realty in Charlotte N.C. and holds a MBA degree and several Real Estate Designations and was recently awarded the 2008: Realtor Client Satisfaction award and is in the top 5% of all agents. James works with first time buyers, sellers, and move-up and relocation clients. James can be reached at 704-688-0436 or http://www.BestCarolinaHousing.com