Interest

• The interest paid each year on your mortgage is completely tax deductible, with the largest deductions coming in the first few years, when interest payments greatly outweigh principal payments.
  
  

Property Taxes

• Property taxes are fully deductible on your federal tax return.
  
  

Points or Origination

• Your origination fee, the charge assessed on your mortgage loan, is also completely deductible over a period of one year. After that you can no longer claim that deduction unless you refinance your first mortgage.
  
  

Home Improvements

• You can partially deduct the cost of improvements made to your property, including installing new windows or a roof and upgrading a kitchen or bathrooms. Also, installing renewable energy sources to your home can earn you an additional tax credit.
  
  

Considerations

• Renting provides no tax shelter or benefit for you, but it does provide significant savings for your landlord. Purchasing a home is worth the tax breaks.
  
  

Warning

• Prior to making any large mortgage-related deductions on a tax return check with a tax adviser. Underpaying taxes could result in a lien against your property and ultimately, a foreclosure.