You've heard again and again how buying a home is the best tax break around. Maybe you've even been called a chump for renting. After all, paying $1,200 a month for your mortgage is really the equivalent of paying $900 a month in rent. But how does that work exactly?

Here's the deal: Mortgage interest (including points) and real estate taxes are tax deductible. That doesn't sound very sexy, but it adds up. Since most of what you pay for your mortgage in the first years is interest, on a $1,200 mortgage payment you get to deduct about $1,080 a month. That reduces your taxable income by about $13,000 a year. If you're in the 28% tax bracket, that deduction is worth about $300 a month.

To see the benefit, you can either wait for a big payout after you file your income-tax return, or adjust what is withheld from your paycheck each month. Claim additional allowances on your W-4 form and your paycheck will jump immediately. You'll have to do the worksheet on the back of the W-4 form to figure out how many additional allowances you can claim. But using the above example, you could take two or three more.

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