NEW YORK (Tribune Media Services) - This is the time of year when many people flock to subdivisions, tour "open houses" and scan real estate classified ads with hopes of trading up to a nicer home.

If you expect to do some home shopping this summer, you'll want to do some tax calculations now.

How much home you can afford to buy will likely depend in part on how much you can count on the tax code to subsidize your monthly payments.

The tax code has long provided sizable incentives to help individuals achieve the American dream of home ownership. The tax savings from homeowner deductions can effectively reduce the out-of-pocket cost of owning a home by thousands of dollars a year.

But figuring the tax savings will be trickier in the face of some coming tax changes being phased in by the Tax Relief Act of 2001. Some of those changes will effectively reduce the value of real estate tax breaks for millions of homeowners.

The itemized deductions for mortgage interest and property taxes are the main sources of tax savings for homeowners. How much you'll save will depend largely on your tax bracket.

Say, for example, mortgage interest and property taxes on a home total $1,500 a month. For a homeowner in the 27 percent tax bracket, deducting the payments would result in federal tax savings of as much as $405 a month. That would reduce the out-of-pocket cost of the $1,500 monthly payment to $1,095.

The tax savings would be much less for those in the 15 percent tax bracket. The out-of-pocket cost of the $1,500 monthly payment would shrink by only $225, to $1,275.

The calculations are more complicated for higher-bracket home buyers. People with six-figure incomes will find they can't deduct all their mortgage interest and property taxes. That's because most itemized deductions -- including those for mortgage interest and property taxes -- are reduced by 3 percent of the amount by which your adjusted gross income exceeds $137,300 in 2002. (The threshold is adjusted for inflation each year.)

This automatic cutback in deductions is scheduled to be abolished by the 2001 tax act, but not until later this decade. The phaseout will occur gradually between 2006 and 2010.

Wealthier home buyers face another obstacle to deducting all their mortgage interest. The tax law limits mortgage deductions to the first $1 million in debt used to acquire a principal residence and a second home.

Millions of middle- and upper-income homeowners will find property taxes won't always be deductible in the future. The reason is that a fast-growing number of taxpayers are projected to fall prey to the alternative minimum tax this decade, partly as a result of changes made by the new law. When you're forced to calculate your tax liability using the AMT formula, property taxes aren't deductible. The number of taxpayers afflicted by the AMT is projected to jump from 2.7 million this year to 35.5 million in 2010.

To get an accurate estimate of how much your real estate deductions will save you in future years, be sure to use the lower tax rates that are scheduled to be in effect. Under the new law, tax rates above the 15 percent bracket are set to drop in 2004 and again in 2006. The lower rates will reduce the tax savings from deductions. For most homeowners, the impact will be relatively small since the tax rates will only be dropping several percentage points.

But there will be a bigger impact for some middle-income couples. Starting in 2005, the new law will gradually enlarge the 15 percent tax bracket for married couples so that more income gets taxed at the 15 percent rate instead of the next higher rate. That will mean some of their itemized deductions will be worth less -- only 15 cents on the dollar, instead of 27 cents now.