More on the Mortgage Deduction Myth

A short while back I wrote a blog entry on the Mortgage Deduction Myth, which is commonly noted as a benefit of ownership vs. renting. Alert reader Brian Adair wrote in with some great feedback:

"You wrote about someone who deducts $6,000 from their taxes each year because that's what they pay in mortgage interest.

I think we're on the same page, but I want to point out that you've forgotten to mention that, if you don't have mortgage interest and don't have enough other tax deductible expense, you still get a standard deduction - about $5,300 if you're single, about $10,600 if you're married.

So that $6,000 in mortgage interest replaces the standard deduction you would've gotten anyway. In effect, you only get to deduct an extra $700 ($6,000 - $5,300) if you're single. If you're married, you're better off taking the standard deduction ($10,600 > $6,000) and the mortgage interest saves you nothing!

Now, you'll probably have other deductions like charitable donations and state income tax that you can deduct from your federal taxes, but my point is that not all that mortgage interest is actually being deducted - only the mortgage interest that is in excess of your standard deduction.

It makes the whole mortgage deduction argument even more ridiculous."

Good point, Brian, thanks for sharing.