The purchase - According to the IRS, you are able to write off any interest that is paid on a home loan each year. These interest payments are a part of your monthly payments, so figure out exactly how much of this is interest. 

Mortgage interest - You are able to deduct any interest on a loan that is used in order to improve your residence as well. What this means is that if you take out a loan to do renovations, you can deduct the interest on this loan from your income tax. 

The sale - Since your can claim your home as a capitol gain, you can avoid having to pay income tax on the sale of your home. You may have to pay capitol gains taxes, however, so keep that in mind.

If you are able to have a gain from the sale of your home or from an exchange of a home with someone else, you can even exclude up to $250,000 from this gain. This can be used frequently, although it is not recommended that you do it more than every few years because it is an exclusion, rather than a policy. You also are unable to deduct any losses that may occur when you sell a home, so be careful and do not expect too much from the government in terms of tax breaks.

In some cases, people will include a contract where the buyer will pay for the house a little bit at a time. This is called an installment sale and there are special tax breaks available for it as well.

Not everyone is able to receive an exclusion, so look into it before doing assuming that you can receive these tax-breaks. In order to get an exclusion from paying these taxes, you must have owned the home and lived in it for two out of the last five years. Therefore, if you had been renting the home out the entire time, you will not be eligible. If you meet these requirements, then you can begin the process for filing for exclusion, but be sure that you meet the standards or else it will lead to problems with your tax return that will be difficult to fix.

For those who did not meet these requirements, you may still be able to receive an exclusion on a small portion of your sale price if you had to sell the home due to health concerns, an unexpected change of jobs, or any other unforeseen circumstance. Basically, if you sold out of necessity, rather than trying to make some money off of a deal, you may be able to exclude some of your earnings from taxation.

If you have any question on these tax benefits, the best thing you can do is contact an experienced real estate agent to go over things with you and to let you know about how you are liable if you provide false information. There are many tax benefits involved with buying a home, so look into them and see where you could be saving money.

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