Buying a home is the single-most-valuable investment most families make, and home-ownership offers income-tax breaks that make it the foundation for overall tax planning. The tax law provides numerous incentives to home ownership, including the following:

Buying a home, rather than renting, replaces nondeductible rent with deductible mortgage interest. Qualified homes include condominiums, co-ops, and mobile homes. By far, the deduction of mortgage interest stands to be one of the most-advantageous tax benefits. You may deduct interest up to $750,000 under current tax law for home-mortgage debt.

When consumers takes out a mortgage, they are often charged costs by the lender called points. One point is equal to 1-percent of the loan principal. One to three points are common on home loans, which can easily add up to thousands of dollars. You can fully deduct points associated with a home-purchase mortgage.

Taxpayers can deduct up to $10,000 of property tax they pay on any number of residences.

Taxpayers can exclude up to $250,000 of gain ($500,000 for married couples filing jointly and certain surviving spouses) from taxable income when they sell their principal residence. You must have owned and occupied your principal residence for at least two of the past five years. Additionally, if you receive more profit than the allowable exclusion, that profit will be considered a long-term capital asset and receive preferential tax treatment.

Home improvements will save you taxes when you sell your personal residence. Save receipts and records for all improvements you make in your home. The cost of improvements is added to the purchase price of your home to determine the cost basis of the home for tax purposes.

There is no penalty for an early withdrawal from an IRA for a "first-time" home-buyer for up to $10,000 ($20,000 if married, filing jointly) so long as the proceeds are used for the acquisition of a home. "First-time" home-buyer is defined as a taxpayer who has not owned a home in the last two years.

Self-employed individuals may deduct expenses for a portion of the home used for business.

When you buy a home and consistently make your monthly loan payments on time, it demonstrates to other lenders that you are a good borrower. This strong credit history will be helpful on future borrowing.

Houses may increase in value, or appreciate, over time. It's not unusual to find that a house that was bought 15 years ago is now worth much more. This increased worth (equity) is as good as money in the bank.

The decision to buy a home is one of the most important financial decisions a taxpayer will ever make. Home-ownership offers immediate tax benefits and long-term value.

Additional details can be obtained from IRS Publication 530, "Tax Information for Homeowners."

Barry Lisak is an IRS Enrolled Agent, meaning that he has passed special U.S. Treasury Department exams that qualify him to represent clients dealing with audits or tax-resolution cases. Any questions can be directed to him at (516) TAX-SAVE, or

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