PARAMOUNT MORTGAGE - LENDER'S BLOG

By Bill Bischoff - Smart Money

THINKING ABOUT PURCHASING your first home? Then you're probably well aware of the potential tax breaks coming your way.

In case you're not, let's review. While the cost of renting is generally a nondeductible expense (except for when part of the home is used for business purposes), homeowners can claim an itemized deduction for interest on up to $1 million worth of mortgage debt used to acquire or improve their principal residence. Ditto for interest on up to $100,000 of home-equity debt secured by their principal residence. Real-estate property taxes can be claimed as an itemized deduction, too. You also can generally deduct any points you paid (or the seller paid on your behalf) to take out the mortgage.

But you probably knew all that, right? Now for the tax-law catches your realtor probably never told you about. Don't worry: What's detailed below probably won't have you running back into the arms of your landlord. But it just might give you a more realistic expectation of how homeownership will affect your future tax bills.

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