If you're earning $300k/year in California, you're paying ~$22k in state income tax, so you should be itemizing on your federal return with or without the mortgage, and subtracting the standard deduction from the benefit doesn't seem right.
Looks like you're right. I thought state and local taxes were deductible without itemizing but I was wrong. I've been itemizing for years so I guess I got that mixed up. (And I have no state income tax so it hasn't been a factor for years either.)
So that puts you back at the ~1000 mark for savings which probably gets you close to 1.5MM.
