Designed to promote home ownership, federal and state revenue laws shelter your income from taxes when you buy your home, while you own it and when you sell it. If you own your home, you deduct your mortgage interest and you've sheltered some of your money,'' said Peter Vernaci, a certified public accountant in San Jose. It only reduces the amount of tax you owe.
Homeowners get much more shelter.
To begin with, home buyers get to fully deduct the points associated with a home purchase mortgage, but only true points. If the buyer is borrowing money from a financial institution, the points will very likely be interest and be deductible. If the buyer is borrowing money from a loan or mortgage broker, the points will very likely be the broker's fee or commission and are not deductible. The buyer should check with the lender to be certain that the points are interest,'' said Marie Sternberger, a Sunnyvale-based enrolled agent. Each point is 1 percent of the financed amount, and in many cases the buyer can also deduct points paid by the seller.