The taxes you pay are dependent on your individual situation (income, marital status, etc.). Your tax savings depend on the same factors, which means that no tax rules will cover all people. Following, you will find some information on what is and what is not generally deductible from your federal income taxes.
You may only claim your tax savings on your home when you itemize your deductions.
Acquisition debt, according to the IRS, is mortgage loans used to fund (buy, build or improve) a principal residence and a second home. You may deduct interest paid on your acquisition debt, up to $1 million (up to $500,000 if married and filing separately), for the year in which the interest was paid.
Points are deductible the year they are paid (by the buyer or seller). Deductions taken for points paid on a refinanced mortgage are to be spread out over the life of the loan.
All real estate property taxes are deductible if they are paid at closing or to a tax authority.
The interest paid on a home equity loan is deductible if the total amount of home equity debt does not exceed $100,000 and the LTV ratio does not exceed 100%.
Late payments fees and mortgage prepayment fees are also deductible.
Some cities participate in the Mortgage Credit Certificate program which allows first time buyers to reduce their federal tax liability by an amount tied to how much is paid annually in mortgage interest. Call your local housing agency to ask about this program.
You may not deduct maintenance expenses, depreciation or closing costs.
To read more on tax rules associated with home owning, you may call the IRS at 1-800-TAX-FORM or click here to view a list of IRS publications.