No matter what the economy and the housing market is doing currently buying a home can be a great investment. Perhaps because of the current market in houses, the old adage of buy low and sell high makes it especially attractive right now. Whether your are looking at buying or already own a home, here are some tax breaks you need to know about.

The mortgage interest deduction is perhaps the largest tax break available for home owners and can save them a significant amount of money each year. In the beginning of your years as a homeowner the majority of your payments to the bank go toward loan interest and that interest is deductible. You will receive a 1098 statement each year showing the amount of interest you paid and all of the necessary information to put on your return in order to claim it. This form is also your proof for the IRS in the event of an audit.

Points, or the charges you pay to reduce the interest charges on your loan are deductible on your primary residence when you purchase it. Points on refinanced mortgages are unfortunately only deductible each year over the life of the loan. Check the IRS Rules when claiming these so as not to make a costly mistake.

If when buying a home or refinancing you end up with a loan to value ration that is higher than 80% the lending institution will require you to carry private mortgage insurance (PMI). This insurance protects the lender against you defaulting on your loan payments. Typically once the value of the home exceeds 80% of the loan you no longer need to carry it and can cancel or remove the expense.

Until then you can deduct the premiums for PMI provided your income does not exceed 100,000 a year as a married filing jointly couple. If your income is higher than that, then your deduction is reduced or eliminated entirely.

In the effort to reduce your utility bills, you can also choose to purchase energy efficient appliances, windows, doors and skylights. These items need to meet the energy star program requirements or the rules Oregon’s department of energy has set forth. Forms need to be filed with the state and provided to your tax person in order to claim the deduction. Make sure that you file the forms well in advance of filing your return so that your preparer does not have to amend them later.

Property taxes are also tax deductible as long as they are based on the assessed value of the real property. If you pay your taxes out of pocket you will need to locate the bills your received from the state to determine how much you paid. Most homeowners pay through an escrow account with their lender and as such it usually appears on the 1098 form.

Staying organized and keeping records allows you to take advantage of these tax breaks and others when it comes time to sell your property which the average American does every seven years. If understanding the rules and forms is a challenge or nuisance for you, consider using a tax professional to help.

Gary Baker is a Licensed Tax Preparer and can be reached at 503 - 428 - 1043