The following article addresses many common money management mistakes. I hear this one quite often. “Why should I pay off my mortgage? It is one of the few tax deductions I have.”
Source: The Cincinnati Post
by Mary Hunt
Misunderstanding deductibility: There is a myth that says you should not pay off your home mortgage. In fact, you should get another one because the interest is tax deductible. That is an industrial-strength blunder. Deductibility is a consolation prize. It softens the blow on expenses that cannot be avoided. Example: If you are in the 28-percent tax bracket and pay $1,000 in deductible mortgage interest a year, that translates to a $280 reduction in your tax bill. If you pay off that mortgage, you lose the $280 tax relief. But guess what? You get to keep the $720, too! Who in their right mind would chose to pay $720 to get back $280?