But if this is your first tax year in your house, dig out the settlement sheet you got at closing to find additional tax payment data. When the property was transferred from the seller to you, the year's tax payments were divided so that each of you paid the taxes for that portion of the tax year during which you owned the home. Your share of these taxes is fully deductible.

Property taxes must be deducted as an itemized expense on Schedule A.

When you sell

When you decide to move up to a bigger home, you'll be able to avoid some taxes on the profit you make.

Years ago, to avoid paying tax on the sale of a residence, a homeowner had to use the sale proceeds to buy another house. In 1997, the law was changed so that up to $250,000 in sales gain ($500,000 for married joint filers) is tax-free as long as the homeowner owned the property for two years and lived in it for two of the five years before the sale.

If you sell before meeting the ownership and residency requirements, you owe tax on any profit. The IRS provides some tax relief if the sale is because of a change in the owner's health, employment or unforeseen circumstances. In these cases, the tax-free gain amount is prorated.

A ruling by the IRS in late 2002 could put more dollars in homeowners' pockets when they must sell before they qualify for the full tax break. The Treasury has defined the unforeseen circumstances that often force homeowners to sell and under which they now can get some tax relief.

A partial exclusion can be claimed if the sale was prompted by residential damage from a natural or man-made disaster or the property was "involuntarily converted," for example, taken by a local government under eminent domain law.

Second home sales also can provide some tax benefits, but not as much as they did in the past, thanks to a law that took effect in 2008. Previously, you could move into your vacation property, live in the home as your primary residence for two years and then sell and pocket up to $250,000 or $500,000 profit tax-free. Now, however, you'll owe tax on part of the sale money based on how long the house was used as a second residence.

What's not tax-deductible

While many tax breaks are available to a homeowner, don't get too carried away. There are still a few things for which you have to bear the full cost.

One such expense is insurance. If you pay private mortgage insurance, or PMI, because you weren't able to come up with a large enough down payment, that's a cost you probably won't be able to deduct -- unless you meet the requirements of a special PMI law. Under this law, some homeowners can deduct on Schedule A their PMI payments on loans originated or refinanced between Jan. 1, 2007, and Dec. 31, 2011, and which meet certain loan amount limits.

The other big home-related insurance cost, property hazard insurance premiums, still remains nondeductible for all, even though the coverage generally is required as part of the home loan and is included as a portion of your monthly payment.

Other nondeductible residential expenses include homeowners association dues, any additional principal payments you make, depreciation of your home, and general closing costs and local assessments to increase the value of your neighborhood, such as construction of new sidewalks or utility connections.

What about all those repairs that seem to crop up the day after you move in? Surely they're tax-deductible. Sorry. While they'll make your house much more comfortable, you're on your own here, too.

But hold on to the receipts. Some long-time homeowners may find their property has appreciated beyond the $250,000 ($500,000 for married couples) amount the IRS will let you keep tax-free when you sell. If that happens, the records of property improvements could help you establish a higher basis for your house and reduce your taxable profit.