There's nothing quite like purchasing your first home. You're on your own. You have a
substantial financial investment. And now you're thinking of the tax breaks.
Your largest tax write-off is probably going to be the interest you paid on your mortgage.
This is a particularly valuable tax break in the early years of a home loan, when most of
your monthly payments go toward interest charges. Just make sure you count all of it,
whether it was paid to an institutional lender or it was a private loan.
A common private home loan is one obtained through seller financing. Interest
paid to the seller is deductible, as long as the loan is established using the same guidelines
as for a conventional bank mortgage. The same is true if you borrow money from
a relative for your house purchase. Again, you need to be sure the loan is documented
properly (it's probably a good idea to have an experienced real estate lawyer help you
set up this arrangement) and that an appropriate interest rate is charged. But as
long as the money is secured by the house, it's a mortgage, and the interest is deductible.