Tax time can also be an eye opener for those who can't take advantage of certain deductions such as mortgage interest or property taxes. Realtor John Leslie of Alain Pinel Realtors in Los Gatos advises clients to consider the advantages of buying versus renting.

"Renting is like giving Uncle Sam 25 percent to 30 percent of the salary. Our whole economic system rewards homeowners and not renters. When I say this, it usually stirs up the conversation. The point is that owning a home gives you a wonderful set of benefits, including pride of ownership, a great tax shelter and an amazing investment for the future," Leslie said.

Leslie encourages young couples just starting out to buy a condo or town home as soon as they can qualify for the financing.

"I have learned that the earlier people own property, the more affluent they become. The classic model is to buy a condo, then trade up to a small home. After some appreciation, move up to a larger home. These steps work for so many homeowners. Some find, along the way, that they can rent the condo, instead of selling it to trade up. They find that acquiring property naturally leads to acquiring another as each appreciates and their own income increases over time," Leslie said.

Since the benefits of home ownership are highlighted during tax season, Leslie believes it's a good time for people who are renting to do a simple exercise to figure out their tax liabilities.

"I ask them to think about how much they paid in taxes last year and what they expect to pay this year. Have them divide that by 12 and let them see how expensive it is to rent every month. A negative incentive sometimes has a real impact," Leslie said.

One of the most common excuses Leslie hears from renters is that they can't seem to save enough money for a down payment. He believes the banks have come up with solutions to overcome this obstacle.

"The banks have created 100 percent financing programs. The programs are suited to the people who make a good income and spend every dime they make. A 15-minute conversation with any lender can be the wake-up call so potential buyers can see what they can qualify for, and it is always such a surprise that they can get financing when they were certain they couldn't," Leslie said.

For those who are weighing their options and want to see how a mortgage will affect their taxes, purchasing a copy of TurboTax or a similar product is a good idea. Potential buyers can enter different purchase prices and loan amounts to calculate how the figures can impact tax bills.

For homeowners, mortgage interest is usually the biggest tax deduction. Additional deductions associated with owning a home include property taxes, interest on a home equity loan or line of credit secured by a home and points paid when purchasing a home. How much money can actually be saved depends on taxable income, filing status and standard deductions or other itemized deductions.

Some of the things that cannot be deducted include homeowner association dues, appraisal fees or home improvements. Of course, there are some exceptions, so it is important to check with the IRS or a tax professional. In addition, deductions cannot be taken for insurance for the home, including fire or homeowners insurance premiums.

There are some tax implications that sellers need to be aware of when selling a home. Capital gain can occur when making a profit on the sale of a home. Sellers might be able to avoid taxes on the profit if they buy another home of equal or greater value within two years of the sale. Sellers may also qualify for an exclusion of up to $500,000 if married filing jointly or up to $250,000 if single. Since there are certain restrictions surrounding the exclusion, it's wise to consult a knowledgeable professional who can help decipher the fine print.

In addition to IRS deductions, there is another way to save on taxes that can benefit homeowners who are 55 years old or older and live in certain counties in California. Proposition 13 prohibits property tax increases until ownership is changed. However, Proposition 60 allows the transfer of the assessed valuation for property taxes to roll over from the old home to the purchase of a new home of equal or lesser value within the same county if either spouse is over 55 years of age. Proposition 90 allows counties to elect to accept transfers of the old, lower taxes.

Realtor Francine Nelson, broker/owner of Realty World in Cupertino, advises people to contact the Office of the County Assessor before buying a replacement property or selling a current residence, to make sure the tax base is transferable.

"I feel fortunate to be working with clients who are able to take advantage of Proposition 90. There are a lot of conditions, and it sometimes takes eight to 12 months to process. It is important to determine the availability of the benefit of Proposition 90 in the county you are considering moving to before making final plans," Nelson said.

Santa Clara is amoung the counties that accept Proposition 90 transfers.

Both buyers and sellers can take advantage of certain tax deductions. As April 15 rolls around again, one thing is certain—it pays to be a homeowner.