The deduction of mortgage interest paid is often the biggest tax break for homeowners. You may deduct up to $1 million used to buy or improve a home. You can find the total interest paid on your home last year on Form 1098 provided by your mortgage lender.
Some buyers pay “points” (1 point = 1% of the loan amount) to borrow a mortgage, home equity loan, or to refinance. Lenders charge points to make a profit, but you can deduct these payments at tax time if paying points is a standard practice in your area and the points charged are fair market value. (Usually the points paid equal the downpayment.) You can find points paid on Form 1098 or in your closing documents. You’ll need to spread the cost of the points over the lifespan of your mortgage, so you won’t see all the savings this year, but it can add up to thousands of dollars saved in the long run.