First, there are some deductions you get when you buy your principal residence. If your loan comes with a loan origination fee, and that fee is expressed as a percentage of the loan amount, you can take a deduction in the year the fee is paid for the entire amount of the fee. And even though it is hard to believe, the buyer can take this deduction regardless of who pays the fee. The same goes for any loan discounts points charged by the lender, even though they are rarely used today.

So if you can find a seller willing to pay your closing costs and discount points, you start off with a big deduction on day one of ownership. Since the typical loan origination fee is around one percent of the loan amount, this can be a large sum.

In addition, any prepaid interest showing on the settlement statement is deductible as mortgage interest expense.

Next, during your years of ownership, the tax benefit in your home is largely limited to two areas: property tax and mortgage interest deductions.

Typically, any county or municipal property tax payment is deductible, while separately billed sanitation fees are not.

The big deduction for most American homeowners usually comes in the form of home mortgage interest, the "rent" that we pay for borrowing the money to buy our home in the first place.

Because our home loan payments are calculated using simple interest, the bulk of our payment during the early years of the loan is interest. On a thirty year loan, only a small percentage of the first years payment is principal repayment. So the majority of dollars we spend to live in our home is tax deductible.

For example, if you borrowed $150,000 at 6% interest for 30 years, your monthly loan payment would be about $900, and your first 12 months of payments would total about $10,791. Of that amount, about $8,950 is interest, and all of that would be tax deductible against ordinary income.

If you already itemized deductions and were in the 28% federal bracket, you would save over $2,500 in federal taxes and over $500 in Georgia taxes, for a monthly savings of over $250. That savings can help make your monthly housing expense more affordable, not only in year one, but for years to come.

If you do not already itemize, your savings would be less, as some portion of your deduction would be lost overcoming the standard deduction all taxpayers get automatically. I caution you that everyone’s situation is different, so consult your CPA about your own tax savings.

Also know that there are limitations on the amount of deductible debt you may use. The interest on the first million dollars of acquisition indebtedness is always deductible, as is an additional $100,000 of home equity debt, regardless of when it is placed on the residence. In contrast, acquisition debt is limited to debt you used to purchase or significantly improve the home.

Because interest on the first $100,000 of home equity debt is always deductible, it can be used to pay off other, non-deductible debt, such as credit card bills or auto loans. This has the effect of converting high-interest rate personal debt into deductible prime-rate based debt, and can save the consumer a bundle. If you can pay off a credit card at 18% with a HELOC at an after-tax rate of 5%, you can see the savings start to add up. This is called debt-shifting, and is another tangible benefit of home ownership.

Finally, the truly remarkable tax loophole available only to homeowners is reserved for sellers. It’s the exclusion of gain on the sale of a principal residence, usually just called Section 121.

In a nutshell, it says this: So long as you have owned and occupied your residence for any two of the five years immediately preceding the date of sale, you may exclude from taxation any gain up to a maximum of $250,000 for a single owner, or half a million dollars for any married couple filing jointly.

Thus, the seller’s profit is magnified when compared to earned income from any source, because the profits are free from all state and federal tax, and are not subject to Social Security or any other taxes which eat away at our wages. In addition, there is no requirement to re-invest, so you are completely free to do with the tax-free profits as you wish.

From first time buyers to long-married empty-nesters, everyone benefits from the tax savings granted to home buyers in America. It’s all part of our system designed to make home ownership attractive.

Our government designed it that way to encourage us to put down roots and take an active part in our neighborhood. And it’s true that buying a house forces you to become more interested in your community and your nation.

So in this quick look at tax benefits, we have seen savings in the purchase, the ownership, and the selling areas of our ownership cycle. No other area of investment comes close to matching the kind treatment real estate gets from our current tax system.