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Originally Posted by Maker
Very simple example. If the interest you pay on the mortgage is $15000, it is more than the standard deductible so it can be deducted.
But the entire mortgage can be paid off at any time, but you put the funds into something very safe (govt backed CD, or something like that) (not stock market) that earns $15000. Have to pay income taxes on that.
So the earned money = deduction for mortgage. Net zero. Sounds good, except for the standard deductible got lost.
Instead... Pay off mortgage. No interest deduction, but no investment income. Net zero? No. You get the standard deduction now. That saves money on taxes.
This concept all shifts as the type of investment changes. Risk it in the stock market, and you could go up or down. That's your decision.
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As I understand it, you can only benefit from the mortgage deduction for the amount that exceeds the standard deduction. So, if the standard deduction is $15K and your mortgage interest is $15K, your tax savings is zero, unless you have other deductible costs in excess of the standard deduction. Also, note that people over 65 get an additional $3,900 exemption that adds to the standard deduction.