If you paid $600 or more in

mortgage interest during the year, you should receive Form 1098, Mortgage

Interest Statement . Box one on the statement shows the total interest

paid on your mortgage during the year and should reflect the interest

you paid at settlement.

If it does not, add the amount

of mortgage interest from your settlement statement to the amount shown

on Form 1098, report the total on Schedule A, and attach a note to your

return explaining the difference.

The amount shown in box two

on Form 1098 represents the amount of points paid. The term "points"

is used to describe certain charges you pay to the lender upon taking

out the loan. Each point is equal to 1 percent of the loan's value and

is treated as prepaid interest under the tax law. In most cases, points

are fully deductible by the buyer in the year they are paid, regardless

of whether the buyer or seller paid the points.

While real estate taxes can

add substantially to your monthly mortgage payment, the amount you pay

to local and state authorities is fully deductible (subject to high-income

phase-out rules). Many lenders include in monthly statements an amount

placed in escrow for real estate taxes. Your deduction for real estate

taxes is equal to the amount the lender actually paid from escrow to the

taxing body. Be aware that this amount may be more or less than what you

contributed to escrow during the year.

If you live in a state that

participates in the Mortgage Credit Certificate Program, designed to help

low­income buyers afford homeownership, you may be able to claim

a tax credit up to a maximum of $2,000, rather than a deduction for part

of the mortgage interest you pay.

To be eligible for the credit,

you must obtain a mortgage credit certificate from your local or state

government before you obtain a mortgage. To claim this credit, complete

Form 8396 and attach it to your Form 1040. Contact your state or local

housing finance agency for information about the availability of MCCs

in your area.

If you've just bought your

home, selling it may be the furthest thought from your mind right now.

However, it's nice to know that, when it comes time to sell, there's another

great tax break awaiting you. You can exclude up to $500,000 in gains

from the sale of your home if you're married and file jointly ($250,000

for single taxpayers and married taxpayers filing separately), provided

that you have owned and resided in the home as your principal residence

for at least two of the prior five years before the sale.

Finally, CPAs point out that

it's important for homeowners to keep accurate records documenting improvements

made to their homes. That's because the costs of certain home improvements

can be used to offset capital gains realized on the sale of your home.

The GSCPA is the premier professional

organization for CPAs

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