Ownership of your home has the added benefit of being able to deduct mortgage interest from your income tax. If you are a homeowner looking to maximize your mortgage interest tax deduction there are several rules you need to know about. Here are tips to help you make the most of your mortgage interest deduction.

For most people buying a home is the largest purchase they will make. Purchasing a home is also an effective tax shelter for part of your income; the interest you pay on the mortgage of your primary or secondary home is fully tax-deductible, up to one million dollars per year. You can also deduct the interest paid on home equity loans and second mortgages.

If you have recently purchased your home, any points you paid to lower your interest rate can also be deducted. There are special rules when deducting your discount points; you may be able to deduct all of your points the first year you file. If you are refinancing your mortgage and pay points, you may have to spread the points out over the life of your loan. There are exceptions, for example if you used equity for home repairs you can deduct the points all at once.

Another tax advantage is when you sell your home you do not pay taxes on any profit realized from the sale, up to $250,00 for a single homeowner or $500,00 for a married couple. In order to claim this tax break the home must be your primary residence and you will need to have resided in the home for at least two years. If you do not qualify based on this rule you may be able to claim a partial deduction based on IRS rules.

The tax benefits of homeownership extend beyond mortgage interest. You can also deduct any property taxes you pay each year. This deduction only applies to the actual taxes you pay; if you keep money in escrow you cannot deduct this amount until it is actually paid for your property taxes.

You can learn more about the tax benefits of homeownership by registering for a free mortgage guidebook: Five Things You Need to Know About Your Mortgage.