Did you just close on your new home? It was a fun journey, wasn’t it? You applied for your mortgage and with your preapproval letter in hand you went shopping and found the perfect home. You now have a place to call your very own and you’re no longer paying your landlord’s rent. But now that you’re all moved in and settled, it’s also time to start thinking about income taxes and as a homeowner, there are some tax advantages you now have that you didn’t when you were a renter.

You probably know this already but perhaps the single biggest advantage is the mortgage interest deduction. What you probably didn’t know is that very early on with a new mortgage, the bulk of your monthly payment goes toward interest to the lender and less to the principal balance. That means almost all of your monthly payment in the early years is an income tax deduction. Interest is deducted from your gross income, reducing your income tax obligation. For example, with a 30 year term on a $300,000 loan at 3.75%, the principal and interest payment is $1,389 and in just the first year, your total interest paid is $11,155 which is the amount that will be deducted from your taxable income.

Your new lender will send a form 1099-INT which will list the amount of interest paid during the previous year. If you just closed in December and are ready to file but have not yet received your 1099-INT, you can look up your interest deduction on your settlement statement on the line labeled, “Prepaid interest.”

Did you pay a discount point to lower your interest rate? Did you pay an origination fee? These too may be an income tax deduction. A discount point, or simply a “point” is a form of prepaid interest to the lender and is therefore tax deductible also. An origination fee is also a potential tax deduction.

What about property taxes? Property taxes are also allowable as an income tax deduction.

Another advantage owning is the exclusion of capital gains when you sell your home. If you own the home more than two years any proceeds from the sale are income tax free up to $250,000 if you’re single and $500,000 if married.

Owning your own home has many benefits and tax advantages are a big one.  As with any tax question, make sure you get income tax advice from a tax professional so when you’re ready to file, you’ll be surprised at how much money you’ll save.