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Bankrate's 2008 Tax Guide
Realty/capital gains
Home, sweet home. It's likely your biggest investment and it affords you some great tax breaks to boot.
 
First-time homebuyers' guide to taxes
First-time homebuyers' guide to taxes
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And remember those points you paid?

If you find that you can't itemize for the year you bought your home, you can take Garwitz's advice and amortize them.

You'll simply spread the points over the life of the loan and deduct the appropriate amount in each future year you itemize your deductions.

If you have a 30-year mortgage, that $3,000 in points, in the example cited earlier, would give you $100 to deduct each tax year that you itemize.

7. Other deductions, thanks to your home
Some new homeowners also might elect to take out a small home equity loan or line of credit in connection with their new residences. While going into more debt that is tied to your residence is a personal financial decision that you must consider carefully, if you do get such credit, at least be sure to take advantage of its tax breaks.

Interest on a home equity line or loan of up to $100,000 is deductible. It doesn't matter if you used the money to buy furniture for your new house, upgraded the kitchen in your fixer-upper or purchased a car. As long as the loan is secured by your residence, its interest is deductible.

Did you buy the house after moving to take a job? Then you also might be able to write off some relocation expenses. "If the move was either to start a new job or your current office relocated you to a new location more than 50 miles from your old job," says Gronsky, "some of those expenses might be deductible."

Alternatively, if you are self-employed and working out of your house, home office deductions might apply.

And if you make any improvements to your home to alleviate a medical condition, such as the installation of a ramp or central air conditioning to alleviate allergies or asthma, says Gronsky, these also might help boost your itemized deduction amount.

8. What's not deductible
But don't get carried away with writing off any and everything connected to your home.

Many things you'll see listed on your HUD-1, such as appraisal charges, title insurance, credit report fees, and state and local "recordation" transfer taxes (as some states call them), are not deductible on your federal tax return, says Kass.

Wait a minute. Recordation taxes? Aren't taxes connected with your home deductible? Yes, as long as they are real estate taxes. Recordation taxes or stamp taxes or whatever name your region gives them are basically administrative fees connected with your purchase and are not deductible.

Neither is private mortgage insurance that your lender might have required you to purchase -- unless you took out the loan (or refinanced) on or after Jan. 1, 2007, when a new law took effect which enables some homeowners to deduct PMI.

Homeowners association fees are not deductible, however.

"That's simply a personal cost you'll have to absorb," says Garwitz. "The one exception to that is if your homeowners association pays some property taxes for common areas.

"You can deduct your pro rata portion of those taxes," he says. "It's usually not very much, might be only $50, but hey, I want every buck!"

9. Not federal, but tax-related
You also need to pay attention to some more local tax matters connected to your home.

Property-tax exemptions, for example, could help lower your annual property tax bill. While this will mean less to deduct when you file your annual federal tax return, that's usually a trade-off homeowners will gladly make in order to have more money in their personal accounts the rest of the year.

-- Updated: Jan. 10, 2008
 
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NATIONAL OVERNIGHT AVERAGES
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