Take full advantage of all the ways your home can reduce this year's federal income tax bill. The biggest savings will come from deducting four common expenses:

• The interest on up to $1 million in mortgage debt on as many as two homes.
• Up to $100,000 in home equity debt, even if you are also deducting the interest on two homes.
• The premiums for private mortgage insurance -- if the home was purchased or refinanced in 2007.
• Local property taxes.

Deductions are subtracted from your earnings, reducing the amount of income that can be taxed. Most homeowners will reduce their taxes by 25 to 33 cents for every dollar worth of deductions, depending on their tax bracket.

The Energy Policy Act of 2005 provides a tax credit of up to $500 for many home improvements including the installation of extra insulation, replacement windows and high-efficiency furnaces and air conditioners.

Although most of these consumer tax credits expired on Dec. 31, 2007, you have until April 15, 2008 to report these credits on your 2007 taxes.

Tax credits are subtracted from how much you actually owe. Every dollar in credits saves a dollar in taxes.