5 homeownership tax myths

Owning a home tops the dream list for most Americans, and for plenty of good reasons: It's a shelter for your family, a gathering place for your friends and a good long-term investment.

Tax breaks are also frequently cited as motivation for moving from renting to owning, and there are many ways a home can cut your tax bill.

But, as is often the case with the U.S. tax code, homeownership tax benefits are not always clear cut. That frequently leads to some bad information floating around.

While myths, half-truths and misconceptions may abound, we've narrowed it down to five which, if you buy into them, could cost you.

Highlights of the property tax plan

• Tax rollback: Requires counties to roll their property tax base back to the 2005-06 levels, cutting spending $3 billion statewide over the next two years, for a cumulative tax savings of 10 percent for all property owners.

• Homestead exemption: Doubles the exemption to $50,000 for first-time home buyers, but only if they buy homes valued at $100,000 or more. The exemption shrinks over the years as their Save Our Homes savings increase.

• Government spending: Caps at 3 percent plus the average increase in consumer income, then is frozen for one year. Beginning in 2008, property-tax revenues for cities and counties would be capped.

• Renters: Gives tax break to property owners who rent to low- and medium-income earners by basing tax assessment on the properties' rental income.

• Tangible property taxes: Exempts $25,000 of businesses' tangible personal property from taxes. Up to 1 million businesses would be exempt from paying the taxes, and 300,000 future businesses would have a partial cut.

• Portability: Homeowners would take all their Save Our Homes tax savings with them when they move, but the assessed value of the new home would grow at a faster rate than on the old home.

• Eminent domain: Governments that take homestead property through eminent domain must compensate homeowners for their lost Save Our Homes savings.

• Bill of Rights: Taxapayers would be allowed to more easily see how government money is raised and spent.

• Property tax appeals: Changes administrative appeal process for taxpayers seeking to lower their property tax bills.

Think you're ready to buy a home?

Buying a home is a complicated process, and it can be particularly daunting for the first-timer.

The following timeline starts one year before you hope to start seriously shopping for a home. This is an ideal; you can arrange your finances and buy a home in less time, if necessary, but you'd be smart to walk through all of the steps in order. The more time you give yourself for this process, the better.