Homeownership is the equivalent of tax deductions and credits.  While deductions can reduce your taxable income, like those associated with operating a home business from your home, tax credits are actually lower your tax bill. 

For 2010, there are three big tax credits available that every homeowner should be aware of when filing.  First time homebuyer’s tax credit is the obvious one.  If you purchased your first primary residence in 2009 or even in 2010, you can get a tax credit equal to 10% of the home’s purchase price up to $8000.  This is for homes purchased between Jan. 1, 2009 through June 30, 2010.  There are income restrictions.  Single taxpayers cannot have income greater than $125000 and joint filers cannot exceed $225000. 

There is also the existing homebuyer’s tax credit.  For anyone who bought a replacement home between November 7, 2009, and April 30, 2010, you may be eligible for up to 10 percent credit of the purchase price up to $6500.  Vacation homes or a second home are not eligible. Restrictions do apply.  A married couple filing joint can get up to $6,500 or less credit, but single filers or married couples that file separate return can get up to $3,250, you need to have lived in your previous house for at least five consecutive years of the last eight.  Good news is that military, Foreign Service Officer, part of the intelligence community or anyone stationed overseas has till April 30, 2011 to claim the credit.

The third credit is the Home Energy Efficiency Improvement Tax Credit.  The government will reimburse you 30% of what you spend to make your home energy efficiency up to $1,500, for basic home improvement purchases. If the home improvement purchase is beyond the basics, the government will you 30 percent of the cost for your home energy efficiency improvement project with no cap.  As always restrictions apply.  You have to make your material purchase by December 31, 2010. A solar energy system, a wind system, a geothermal heat pump, fuel cells or a micro turbine system are also eligible for 30% credit with no cap. 

Tax deductions can be taken every year by qualified individuals.  Possible home owner tax deductions (these deductions vary depending on individual situations) include property taxes and closing costs as well as interest paid on home mortgage loans.  There are usually local incentives in place as well.

The IRS wants renters to buy and wants homeowners to take care of their homes.  For this reason they put these homebuyer tax credits and deductions in place.  Save money on your taxes and take every credit and deduction you can.