"While we in California seem to be always aware of income, investments or taxes, the overwhelming drive nationwide in the home-buying process is simply homeownership or the American dream," said Jim Meader, broker/owner of RE/MAX Today.

With the increase in home values today, Meader said the financial impact cannot be separated. However, looking back 30 years ago when property values were stable, he believes the American dream was homeownership, not tax advantages. "The tax advantage is a true benefit and was put in place to encourage buying, but the underlying factor is the ownership of your own castle," said Meader.

In addition to the security of homeownership, the tax benefits do add up. In general, owners of single-family homes, condominiums, co-ops and other types of property occupied as a principal residence may deduct certain items as expenses each year on their income tax returns. These include real estate taxes or property taxes and interest paid on a mortgage loan. The loan may be a mortgage to buy a home, a second mortgage, a home equity loan or a line of credit. In certain instances late payment charges on mortgage payments are also deductible.

Some items that homeowners may not deduct include homeowner's association dues or assessments and premiums for fire or homeowner's insurance that are sometimes included in the monthly house payment.

Buyers may deduct certain items associated with buying a home as expenses during the year of purchase, such as points or origination fees and loan discounts, if they meet the criteria for deducting points established by the Internal Revenue Service. Buyers cannot deduct expenses on their income tax for fees for an appraisal required by the lender, rent paid to occupy the home before closing, the cost of credit reports or loan assumption fees.

Since tax deductions may change from year to year, it is wise to check with a professional about deductions for individual situations. Homeowners or first-time buyers can also visit www.irs.gov for Internal Revenue Service information.

Additionally, homeowners may take advantage of capital gains tax exclusions on the sale of a home, provided it was owned and used as a principal residence for at least two of the five years preceding the sale. Taxpayers can exclude up to $250,000 for single filers or $500,000 for joint filers. In addition, longtime homeowners may be able to reap another tax benefit with Proposition 90. In certain counties, including Santa Clara County, homeowners who are 55 years or older can transfer the tax base on a present home to a new home that is equal to or less than the selling price of the old home.

The National Association of Realtors identifies the purchase of a home as a long-term investment that provides both equity accumulation and tax benefits over time. As far as investments go, housing continues on a steady rise as compared to the wide fluctuation of the stock market. Dollar for dollar, the rate of return on an individual's cash down payment on a house is very substantial, since appreciation is based on the total value of the property.

According to a report from Harvard University's Joint Center for Housing, there is a dramatic increase in the rate of return on housing the longer it is held. For instance, the typical homeowner who experiences an annual home appreciation rate of 5 percent and who made a cash down payment of 10 percent will generally receive a 94 percent return on that cash after owning the home only three years. After owning five years, the homeowner's rate of return on the down payment increases to 225 percent; after 10 years, the rate of return jumps to 623 percent.

Housing is not viewed as a quick-in, quick-out investment but rather as one of the safest investments a consumer can make. In addition to the savings accumulated through a build-up of equity and tax advantages, a home also provides shelter. As Realtor Jim Meader said, "We would possibly buy a smaller or less expensive home without the tax advantage, but we would still buy our own home."

"This is not to say that a new homeowner should not seek advice concerning the tax advantages, but it is not what drives us to acquire the single most expensive asset we will purchase," Meader continued. "It is the desire to own our home, to give us control over the space in which we spend two-thirds of our lives, and where our children live. A place where privacy can be had from the rest of the world. A place where we can feel safe and where no one else has control over our usage."

While Realtors can often provide general information about the tax advantages of owning a home, the Silicon Valley Association of Realtors recommends consulting a tax professional to find out specific details about deductions or other tax matters.