For Senior Taxpayers
Question: Are the proceeds I receive from a reverse mortgage taxable to me?
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.
Category: Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries)
Subcategory: For Senior Taxpayers