Q&A: Don’t keep a mortgage just for the tax deduction

Dear Liz: Does the new tax law, with its increased standard deduction, change the calculus of maintaining my mortgage? I owe about $250,000 at 3.25% on a 30-year mortgage. I no longer itemize, so I don’t get the benefit of the tax deduction for the interest. My payments are about $1,500 a month, but I could easily pay it off.

Answer: It never made much sense to keep a mortgage just for the tax deduction. The tax savings offset only a portion of the interest you pay. (If you’re in a 33% combined state and federal tax bracket, for example, you’d get at most 33 cents back for every $1 in mortgage interest you paid.)

A more compelling reason to keep a mortgage would be if you were able to get a better return on your money by investing it, or if you didn’t want to have a big chunk of your wealth tied up in a single, illiquid asset.

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