For Senior Taxpayers
Question: Are the proceeds I received from a reverse mortgage taxable to me?
No, the amounts received from a reverse mortgage are not taxable. A reverse mortgage is a loan. The lender is paying you (in a lump sum, a monthly advance, a line of credit or a combination of all three) while you continue to live in your home.
- With a reverse mortgage, you retain title to your home.
- Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period or die. Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable.
- Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it (usually when you pay off the loan in full). The deduction you can take for interest paid on a reverse mortgage loan is also generally subject to the limit on Home Equity Debt discussed in Part II of Publication 936, Home Mortgage Interest Deduction.
Category: Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries)
Subcategory: For Senior Taxpayers