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12 Tax Breaks for Homeowners

Owning a home is part of the American Dream. Whether you fancy a suburban Cape Cod with a white picket fence or a downtown condo in the sky, there's just something special about trading in a lease for a deed. But that transition can be difficult...and expensive. It's tough saving up enough cash for a down payment and then keeping up with the mortgage payments--to say nothing of the maintenance costs, which are now on you!

Fortunately, Uncle Sam has a few tax tricks up his sleeve to help you buy a home, save on home-related costs and sell your home tax-free. Some of them are complicated, limited or come with hoops you have to jump through, but they can be well worth the trouble if you qualify. So, without further ado, here are 12 tax breaks that can help you become a homeowner and prosper. Take a look!

Using Retirement Funds for a Down Payment

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Before you can become a homeowner, you have to scrape up enough dough for a down payment. If you have an IRA or a 401(k) account, you might be able to tap into those funds to help you buy a home. Savers with a traditional IRA can withdraw up to $10,000 from the account to buy, build or rebuild a first home without paying the 10% early-withdrawal penalty--even if you're younger than age 59½. If you're married, both you and your spouse can each withdraw $10,000 from separate IRAs without paying the penalty. (To qualify as a first home, you and your spouse cannot have owned a home for the past two years.) However, even though you escape the penalty, you're still required to pay tax on the amount you withdraw.

With a Roth IRA, you can withdraw contributions at any time and for any reason without facing a tax or penalty. The

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