One begets the other. No truer is this when you figure in the mortgage interest deduction plus your annual property tax bill.
Depending upon where you live this could have a big impact on your tax bill or none at all. The mortgage interest deduction for most families is the single deduction that allows pushes them over the standard deduction threshold. In the great state of Florida, there is no income tax. However, there is an abnormally large property tax and pretty standard sales tax of 6%.
Depending upon your marital status and your interest rate you need approximately $155,000 in mortgage debt to reach this hurdle. It gives you approximately $6,200 in interest to start off with. This is the break even point, but there are some benefits unlike the standard deduction.
You can now itemize additional things the most pertinent being your property tax. Even for an average home in florida that homestead exempted, it's not unreasonable (due to the 20 fucking percent increase we just received) to have a property tax bill over $4,000. If you're in the 25% tax bracket this could save you an extra $1,000 a year.
However, if you're using the standard deduction this won't help you. The $4,000 won't be enough to lift you over this standard deduction threshold. I'm a big fan of being debt free, but I personally think for the average person out there you should keep your mortgage for this reason until it gets very low. At which point it serves little to no benefit and it should be retired.
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