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Individuals with home mortgages can usually enjoy substantial deductions on their annual income tax returns. If you're considering a home purchase, a mortgage refinance or a home equity loan, you should understand the mortgage tax benefits that may be available to you.

Mortgage Tax Benefits: First Time Home Buyers
If you're considering your first home purchase, there is great news for you: The U.S. government and most state governments allow you to deduct property taxes and mortgage interest on your income tax return. Upon closing, points paid on your new loan are usually tax-deductible as well. Be sure to check with your state franchise tax board, since some regions even offer special incentives and tax breaks for first time buyers.

Tax Benefits of Homeownership
Among other mortgage advice when you're considering a home purchase, you'll learn that there are many tax benefits of becoming a homeowner.

Make a Home Purchase, Get Tax Breaks
A home purchase is probably the largest investment you'll make. It can probably be the wisest, considering the many tax advantages that homeowners enjoy. These benefits may reduce home purchase costs and leave you with more money when it's time to sell. Since tax benefits depend on income and other factors, you should consult an accountant or financial advisor for tax break and mortgage advice.

Mortgage Help: Deduct Interest
When you make a home purchase, you can deduct the interest you pay on your income tax returns. This deduction, like most other homeowner tax breaks, applies to any kind of home. You can even deduct tax on a vacation home, as long as you spend at least 14 days there yearly, or 10 percent of the time that it's otherwise rented out.

Deduct Home Mortgage Points
You can also deduct any amount you pay for points to reduce interest rate of your mortgage or other home-related loan. In most cases, all points purchased to buy or build your principal home can be deducted in the first year.
If you complete a mortgage refinance, or you take out a home equity loan or another loan secured by a second home, however, the points must be deducted over the life of the new loan. The exception is if you use part of a mortgage refinance to improve your house: This portion may be deducted in the same year.

Tax-Free Profits
In most cases, you don't have to pay taxes on any profit you make when you sell your home. The law allows you to exclude from taxes up to $250,000 in profit from the sale of your principal home, or $500,000 for a couple that files jointly. This exclusion also covers the sale of a parcel of land adjacent to your house, unless it's used for business.

There are some stipulations, however. The home must be your principal residence, and you (and your spouse) must have lived there for at least two of the previous five years. You can only claim this exemption once every two years. If you don't meet these requirements, you may still claim a partial exemption if the sale was due to unforeseen circumstances, such as work relocation or health reasons.

Deduct Property Taxes
In addition to tax benefits of a home purchase, you can also deduct property taxes. This applies to both your principal home and any others you may own. Any money held in escrow to pay future taxes, however, is not deductible.

Deduct Moving Costs
If you purchase a new home that's at least 50 miles closer to your job, you can write off many of your moving costs. To qualify, you must continue to work full-time in the general area of your job for 39 weeks in the following year.

If you're self-employed and you work in your home, any move of 50 miles or more will make your moving expenses deductible. However, you must also work full-time near the new location for 78 weeks during the next 24 months.

Be Prepared!
Before making any serious financial decisions, such as applying for any of these home mortgages, be sure to consult your tax advisor. You'll also want to keep your paperwork up-to-date and organized, so that all your information is handy at tax time. Retain receipts from purchases related to home improvements, as well as monthly mortgage statements.

For more information, visit the Internal Revenue Service's <http://www.irs.gov/publications/p530/ar02.html> website for more information on home mortgage tax benefits.