Owning a home makes a lot of sense because of the built-in tax breaks that accompany the purchase of a home. To take full advantage, it’s necessary to itemize your taxes, and while this may seem like an unnecessary hassle, the benefits are well worth it.

Here are four tax breaks every home owner should know:

1. Mortgage interest deduction – In the early years of your home mortgage most of your monthly payment is applied to interest. Fortunately, the IRS allows you to deduct interest on loans used to buy, build, or improve your first or second home – as long as the loan is secured by the property. Your lender will issue a Form 1098 each year showing amount of deductible interest you paid during the year.

2. Mortgage insurance premiums – If your home loan was for more than 80% of the purchase price, you must carry private mortgage insurance (PMI) to protect your lender in case you are unable to repay the loan. But, did you know that if your Adjusted Gross Income is less than $100,000 for married couples, you might be able to deduct what you pay for PMI each year?

3. Points – Many people pay “points” when they obtain a mortgage. If you did, it will show on the Form 1098 you receive for the year your mortgage originated. You can deduct these charges if the loan was for your primary residence.

On your original mortgage, you are allowed to deduct all the points in the first year of the loan. If you missed this deduction in the first year, you may still be able to deduct the points you paid over the remaining years of the loan. For second mortgages, refinances, or home equity loans used to improve the property, you can deduct the points spread over the life of the loan.

If you refinanced in 2010, did you check to make sure you deducted any as-yet-undeducted points for the loan you paid off? Many people overlook this deduction. Check with an accountant or tax preparer to help you determine how much you can deduct and when.

4. Property – Here in Oregon, homeowners pay property taxes based on the assessed value of their real property. You can deduct state and local property taxes on your Federal Income Tax forms. If you pay these directly, you will need to keep your property tax statements with your permanent records. (You should keep them anyway.) However, if your property tax payments are included in your monthly payment, they go into an escrow account and the lender pays the tax. In that case, the information will also appear on your annual Form 1098.

These four income tax breaks for home owners are the most common. They can add up to several thousand dollars each year and result in you receiving a refund you would not otherwise get. The IRS rules can change from year to year, but it will pay you to determine if you qualify for any of these deductions.

What if you did overlook one or more of these four tax breaks for home owners? You are entitled to file an amended tax return and claim the deductions within three years of the date your original tax return was due. An accountant or tax preparer can do it for you.

Are you eligible for any, or maybe all, of these home owner income tax deductions? Have you claimed all that you are entitled to claim?

These are great questions and ones that deserve answers. I am not a tax attorney but I have some great contacts that can most certainly help you understand these tax advantages. You can call me direct at: 503.680.4868 or email me at: Marty@MartyWeil.com

Pass it along…I would be grateful if you would forward this post to anyone you know who is looking for a home or thinking of selling their home.

My goal: To be a GREAT real estate resource to clients, friends and family. I make myself available to those in need of help or guidance in any part of the real estate process. With over 24 years experience in residential real estate, including building new homes, I have the experience and expertise you need when you buy or sell a home in the Portland Metropolitan area.

Do you have any questions for me? If so, please contact me by phone: 503.680.4868 or email: Marty@MartyWeil.com