The property taxes and mortgage interest you pay on a personal residence are fully deductible from your income tax every year you own your home. When you purchase a home, some closing costs also are tax deductible in the year they were paid. For example, the loan origination fee, or points, is considered prepaid interest by the IRS and is deductible in the year you purchase the house. Because 1 point is equal to 1 percent of the loan amount, this can add up to a sizable tax deduction.