Reverse Mortgages and TaxesEffects on IncomeA reverse mortgage is a loan. As a result, the proceeds from a reverse mortgage are not considered taxable income by the IRS. 
The proceeds of a reverse mortgage
are not taxable income Tax deductionsThe interest on a reverse mortgage is tax deductible. However, the tax deduction can only be claimed in the year in which the interest is repaid. As a result, the size of the potential tax deduction builds up until the year when the reverse mortgage is repaid by the homeowner or their estate. Payment of property taxesA reverse mortgage has no effect on the homeowner's obligations to stay current on property taxes, homeowner's insurance, etc. Consequently, the homeowner must continue to pay these costs. Although the homeowner can request that these costs be put into an escrow account with the reverse mortgage, this practice is rare. Recommended reading: |
