Question
Are the proceeds I receive from a reverse mortgage taxable to me?
Answer

No, reverse mortgage payments aren't taxable. Reverse mortgage payments are considered loan proceeds and not income. The lender pays you, the borrower, loan proceeds (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.
  • Also, interest (including original issue discount) accrued on a reverse mortgage isn't deductible until you actually pay it (usually when you pay off the loan in full). A deduction for interest paid on a reverse mortgage loan may be subject to the limit on home equity debt discussed in Part II of Publication 936, Home Mortgage Interest Deduction.

 

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