Is a reverse mortgage taxable income?

A reverse mortgage is a special type of home loan available to homeowners, 62 years or older of age that allows you to access part of the equity available in your home. The loan is called a reverse mortgage because instead of paying to a lender, the lender pays you.

It is up to you how you want to receive the payments. Depending upon your requirements you can get payment in a lump sum amount, fix monthly income, line of credit or combination of all. 
How a reverse mortgage works when a homeowner dies?

So, if you die, your surviving spouse can continue with the reverse mortgage facility while living in the home. But, upon the death of the owner and eligible non-borrowing spouse, the loan becomes payable.

Your heir can keep the house after paying the loan to the lender. The heir can either pay full loan balance or 95% of the home’s appraised value–whichever is less. But if the heir doesn’t wish to keep the home, the bank will sell the house in order to generate needed cash and will pay back the extra money to your heir.

Now, let us make you familiar with reverse mortgage tax implications. 

Is a Reverse Mortgage Taxable Income?

Reverse mortgages are the loan advances you get, not income you earned. Perhaps, the payments you receive from a reverse mortgage are not taxable. But, as this information does not constitute tax advice so it is always better to consult a tax advisor. Learn more about the different aspects of reverse mortgage income including property tax, interest deduction and tax deductible. 

Reverse Mortgage Property Taxes

After you opt for a reverse mortgage you still are the owner of your house until you to move to another place or dead. So, being a primary residence of your house you need to pay property taxes on time. Also, you are responsible to pay for repairs and property insurance. In case you are unable to pay these charges it may result in reverse mortgage foreclosure.  

Reverse Mortgage Interest Deduction

In a reverse mortgage, the lender pays you in a lump sum, a monthly payment, a line of credit, or a combination of all three while living in your home. It means with a reverse mortgage you retain the title to your house.

You need not repay the loan as long as you live in your home. And, the interest on a reverse mortgage is not deductible until the loan is paid off. The interest on payments your receive builds up over the years which you or your heir need to pay when you sell your home, reach the end loan period or die.

Are Any Reverse Mortgage Expenses Tax Deductible?

While there is no tax on HECM reverse mortgage loan, there is many other tax complexity when it comes to the deductibility. Here are some expenses that come under tax deductibility.

  • The tax deduction would be there for a closing cost that you need to pay at the starting when applying for a reverse mortgage.
  • Reverse mortgage expenses become deductible if you already have an existing mortgage which is so large that paying it off exhausts the lending limit of the reverse mortgage.

Most of the time reverse mortgage expenses are not tax-deductible. You can’t deduct the interest from your taxable income because you are not paying it currently. As the name implies, a reverse mortgage is opposite to that of a regular mortgage. It means that not only tax implications are different, but tax deductions are different as well.

The interest gets added to the loan balance, which isn’t paid until you sell the house. Ordinarily, tax-deductible doesn’t happen until you die or move to the other place permanently. When you sell the house or repay the mortgage, the accumulated interest will get deduct at that time.


A reverse mortgage is a great option for seniors who need some extra money for daily expenses and don’t care about passing their house on to family members. A reverse mortgage put no effect on your taxes except in a few rare cases, which you may know from your tax adviser or financial adviser.

If you are thinking about how much you can get from a reverse mortgage, you can use our reverse mortgage calculator it helps you with the exact value of your home. Also, with this you can check your eligibility as well. For a detailed understanding of reverse mortgage, you can consult professionals like Brett. 

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