It’s the New Year! This means new possibilities and new opportunities are abound! But it also means it’s time to get business in order in preparation for tax season. It’s common during this time of year for me to receive many questions regarding taxes and reverse mortgage– from both those considering a reverse mortgage, and those who already have a reverse mortgage.
Here are the two most common questions I get:
Are the funds from my reverse mortgage considered “taxable income”?
No. This can often be a huge benefit of a reverse mortgage – the funds received are NOT taxable, meaning they do not count as income. This can be a positive compared to other types of retirement income, including various investments, some of which are taxable. Because the funds received from a reverse mortgage are technically an advance on a loan, any payments or lump sums received are not taxable income and do not need to be reported on a tax return. They also typically do not affect Social Security or Medicare payments.
Is the interest from my loan deductible?
No. Because reverse mortgage holders do not make monthly mortgage payments and typically the interest is not paid until the loan is paid in full, the interest from a reverse mortgage loan is not deductible on a tax return. This is also the case with a reverse mortgage for purchase loan.
FHA insured reverse mortgages are available to homeowners 62 and older in the Seattle, Washington and surrounding areas. These loans allow the borrower to live mortgage payment free and receive their loan payment in monthly installments, a line of credit, a lump sum, and even as a tool to purchase a new home. All borrowers are required to participate in third party counseling to ensure all their questions are adequately answered before making a decision.
Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.