The myth of the mortgage deduction

The mortgage interest is one of the most celebrated tax deductions in all of the tax deduction kingdom.  But should you pay off your mortage or even pay cash for a home purchase assuming you have the money available, thereby forgoing the tax deduction of mortage interest?    The answer is "yes" and I will explain why. 

First of all you should never occur an expense just to get a tax deduction thus reducing your tax.  If you are in a 28% tax bracket and you pay $10,000 in mortgage interest, the $10,000 deduction saves you $2,800 in taxes, but you are still out of pocket the remaining $7,200. 

Second, the standard deduction continues to rise.  In 2009 and 2010 married filing joint taxpayers received a standard deduction of $11,400.  That means you get a deduction of $11,400 even if you don't have any itemized deductions, such as mortgage interest. 

But you might suggest you can invest the money and make more than the mortgage company is charging you for interest.   Good luck in finding a trully safe investment that can do that.