• Federal income tax breaks
• Property taxes
• Homestead tax exemption (a tax "credit" for Florida residents)
• Personal property tax exemptions

Tax benefits—yes, the IRS has a heart.
Believe it or not, there are some pretty generous tax laws in your favor once you become a homeowner. Here are a few ways you can enjoy that rare and beautiful thing—the tax break. If you file an itemized tax return, you are allowed to deduct the following home-buying expenses:

• Loan discount points and other loan fees may be deductible in the year the home was bought

• Mortgage interest each year

• Property taxes each year

• Interest on a home equity loan (second mortgage) up to $100,000 borrowed

• The ultimate tax benefit—if you're married, you can make up to $500,000 in profit on the sale of your home and pay no federal income tax! (Singles can earn up to $250,000 with no tax penalty.) The catch is you have to own and live in the home for at least two of the past five years. But you can continue to buy and sell homes every two years as long as you live, and continue to reap the tax-free profits.

Property taxes—an annual "ugh."
Local and state governments run, in large part, on revenues collected from property taxes. How much you'll pay depends on the value of your property. On average, you can expect to pay about 1.5% to 2% of the purchase price of your home each year, but there are other variables. If you simply ask the sellers what they were paying in property taxes, you could be in for a surprise later because your home will eventually be reassessed at the price you paid for it.

It's smart to ask your local tax collector's office for an estimate. If you feel your tax assessment is too high, ask your real estate attorney about your right to contest the amount. Also, find out if you qualify for an exemption; for example, certain individuals (i.e., veterans or people 65 and over) may be fully or partially exempted from property taxes.

If your down payment was less than 20% of the purchase price, your lender probably insisted that your monthly mortgage payment include property taxes (and homeowners insurance). The money for property taxes and insurance is held in a separate account called an "escrow" or "impound" account. The lender receives, then pays, these bills on your behalf. So why should you care about property taxes if they're already figured into your monthly mortgage payment? Because if the taxes go up, the lender will inform you that there's not enough money in escrow (impound) to cover it. You then are responsible for coming up with the difference.

Homestead tax exemption.
The homestead tax exemption is the tax "credit" for Florida residents on their principal residence. The exemption basically takes $25,000 off the tax-assessed value of the property, thus giving homeowners a tax reduction of about $500. Your real estate attorney can tell you where and how to file for a homestead tax exemption. After filing, you'll need to determine your county's procedure for maintaining this status in the future.

Personal property tax exemptions.
Veterans and certain individuals—such as widows, widowers, blind and disabled persons—may qualify for personal exemptions that lower their property taxes or even provide a 100% exemption.