Buying a Condo is often the largest investment you will ever make. This process generally involves a loan with complicated paperwork and possibly other obstacles and other hoops you'll have to jump through along the way.
1. Mortgage Interest - This interest is tax deductible on a maximum of $1 million in mortgage debt. You may also deduct the interest on other debt up to $100,000 which uses your home as security such as a home equity loan. In the early years of the loan most of your note goes to interest.
2. Points - When you apply for a loan, your mortgage lender may charge you a variety of fees. You may choose to pay "points" or a "loan origination fee". These fees are calculated at 1% of the loan principal and buyers typically pay one to three points. The cost of points can be fully deducted when purchasing a condo.
3. Property Taxes - Real estate taxes may also be deducted from your income. This applies to your principal home and any second home or condo you may own.
4. Capital Gain/Profit - Usually profits from the sale of a condo are taxed and are known as a "capital gain". Thanks to the Taxpayer Relief Act of 1997, married homeowners are allowed to exclude up to $500,000 in profit from the sale of their principle residence and single homeowners can exclude $250,000. You can file for this capital gain exclusion every two years, as long as the property you sold is your principle residence and has been for the past two of the past five years. Partial exemptions can be made if you owned your home for one year.
For more information on the tax benefits of owning a home you can check out IRS Publication 936 which is entitled "Home Mortgage Interest Deduction". This publication can be found at IRS.gov or ask the person who does your taxes if they happen to have a copy.