Compared to most other kinds of investing, home ownership offers some valuable tax benefits. However, to take full advantage of some of them, you need to buy your home with a
mortgage:
You can deduct mortgage
interest on your federal tax return, and often from
your state tax return as well.
You can also deduct
many of the initial costs of buying, including points,
or prepaid interest, in the year you buy.
You can deduct local
property tax on your federal tax return.
You may be able
to exclude
capital
gains
on the sale of your home when you
file your tax return.
As you probably know, income tax rules can
be complicated. One way to get a handle on what you can
and can't do is by looking at publications the IRS provides
on home ownership. If you're buying for the first time,
you might want to get a copy of IRS Publication 530, "Tax
Information for First-Time Homeowners." Or, if you’re
selling, look at Publication 523, “Selling Your Home,” to
find out about the tax benefits you may be entitled to.
Dwight P. Robinson, Senior Vice President,
Corporate Relations, Freddie Mac
Dwight P. Robinson, Senior Vice President,
Corporate Relations, 