Mortgage Interest Deduction

• The most direct way that you can benefit from having a mortgage is through the mortgage interest deduction. When you have a mortgage, you get to deduct the amount of interest that you pay on it from your taxable income. To take this deduction, you have to itemize your deductions instead of taking the standard allowance. This has the potential to put you in a lower tax bracket and lower your effective tax rate for the year.
  
  

Points

• When you secure a mortgage, you will typically have to pay closing costs on the loan. One of the most common types of closing costs is points. Points are a type of prepaid interest that mortgage lenders sometimes charge borrowers. By paying points, you can buy down your interest rate for the rest of your loan. When you buy points, the Internal Revenue Service (IRS) allows you to deduct the amount that you pay from your taxable income.
  
  

Tax Credit

• When you secure a mortgage, you may be able to qualify for a tax credit as well. The Mortgage Credit Certificate program allows certain home buyers to get a tax credit based on the amount of mortgage interest that you pay. This program is for first-time home buyers and it has the potential to reduce your tax liability on a dollar-for-dollar basis. Some mortgage lenders take this credit into consideration when approving you for a loan.
  
  

Second Homes

• If you are in a position to buy a second home, you may also be able to receive certain tax benefits. When you use a property as a second home and not as a rental property, you get to deduct the amount of interest that you pay from your taxable income. This amount can be added to the interest that you pay for your primary residence to increase the amount that you get to deduct.