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Many potential home buyers, seeking their first home or condominium, are unsure about tax advantages involving real estate and how they work. Taking advantage of these tax breaks is fairly simple and contributes to the affordability of housing.

To begin with, all real estate taxes and mortgage interest payments on your home are deductible on your federal income tax return. Financial institutions often supply year-end statements on the total amount of interest paid on the mortgage during the year.

When you first purchase a home, tax advantages are particularly large. Mortgage interest accounts for almost the entire amount of the monthly payment during the first few years.

This, along with the amount paid in property taxes, can be deducted on your federal tax return. Itemizing these deductions is easier than most people would imagine.

Real estate tax advantages have a direct bearing on housing affordability. Instead of waiting for a tax refund to recover these savings, you may wish to change the number of exemptions on your form W-4 with your employer. This will increase the size of your paycheck and make it easier to handle monthly mortgage payments.

The term "net monthly payment" frequently is seen in real estate ads. This simply means the monthly mortgage payment adjusted for income tax advantages. A realtor, a real estate professional who is a member of the National Association of Realtors, can explain what these advantages mean for someone in your income bracket.

Net monthly mortgage payments often are comparable to rent on similar properties. Yet by owning your home, you are building equity and with a fixed-rate mortgage, total monthly payments are constant while rent on comparable properties usually continues to rise.

In addition to tax savings, homeownership offers shelter, a good investment and pride of ownership.

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