Buying your first home is a huge step. When you leave the world of renting behind, you begin building equity in an investment. And Uncle Sam is there to help ease the pain of high mortgage payments.

Mortgage interest. For most people, the biggest tax break from owning a home comes from deducting mortgage interest. You can deduct interest on up to $1 million of debt used to acquire your home. Your lender will send you Form 1098 in January listing the mortgage interest you paid during the previous year.

Points. When you buy a house, you usually have to pay "points" to the lender to get your mortgage. This charge is usually expressed as a percentage of the loan amount. And, believe it or not, you get to deduct the points even if you persuaded the seller to pay them for you as part of the deal. The deductible amount should be shown on your 1098 form.

Real-estate taxes. You can deduct the local property taxes you pay each year, too. The amount may be shown on a form you receive from your lender, if you pay your taxes through an escrow account. If you pay them directly to the municipality, though, check your records or your checkbook registry.

New for 2008: For the first time, homeowners who take the standard deduction instead of itemizing can deduct part of their property taxes. Joint filers can add in up to $1,000 of property taxes paid to the amounts shown above. Singles can add in up to $500 of real estate tax payments.

Credit for first-time home buyers. If you purchased a primary residence after April 8, 2008, and before July 1, 2009, and are a "first-time" home buyer, you can qualify for a new tax credit for 10% of up to $75,000 of the purchase price. To be eligible, you must not have owned a residence in the U.S. in the previous three years. Nor can the credit be taken if your mortgage is funded with tax-free bonds that states and localities issue to give below-market mortgages.

As always, please check with your CPA to make sure that you are eligible for the deductions outlined on this blog. For real estate information, please contact me at my office at 630.839.9363.