An additional point is that in the US if you live in your home and owe money on it, your investment has significantly better leverage via the mortgage interest deduction.
True, but the MID will very possibly go away or be significantly reduced in the future. During the debt ceiling talks, the proposal by the Gang of Six would have significantly reduced the value of the MID to many people. Of course, the proposal wasn't passed, but I think it shows that the MID is no longer viewed as untouchable the way it once was (as recently as a year ago).
In the US, is all interest deductible? And since your taxes are spread across federal/state/municipal, is it deductible from the tax basis (don't know what the exact term is - the amount your net taxes are calculated on) for all of them?
Interest is deductible in various situations, but for typical filers only interest on their primary residence is deductible.
This is the case for federal taxes. State stuff is all over the map; I don't believe mortgage interest has been deductible in any of the states I've paid taxes in (MD, MA, CA, IL) but there may be some where it is. For the most part there are no municipal or county-level income taxes, so the whole issue is moot for those jurisdictions.
